Short version: most tradies can get a business loan with an ABN, a few months of bank statements and a clear reason for borrowing. The loan type matters more than the headline rate, because a secured loan for a ute or tools is usually cheaper than an unsecured one for wages or materials.
Why tradies borrow
Trade businesses have lumpy cash flow. You pay for materials and wages now and get paid by the client in 30, 60 or 90 days. Borrowing makes sense when it fixes that gap or buys something that earns more than it costs, such as a second ute, a bigger machine or a few extra months of materials while you grow. It makes less sense for covering a loss-making job or paying tax you didn’t set aside.
The main types of business loan
Secured business loan
You put up an asset as security, usually property or equipment. Rates are lower and limits are higher, but the lender can take the asset if you can’t repay. Check what’s being used as security before you sign.
Unsecured business loan
No asset is pledged, so approval is faster but rates are higher and the amount is usually smaller. Some lenders ask for a director’s guarantee, which can put your personal assets at risk if the business fails.
Asset and equipment finance
The ute, tools or machine is the security. It’s usually the cheapest way to fund equipment. See our guides to equipment finance and ute finance.
Line of credit or overdraft
You borrow up to a limit and pay interest only on what you use. It suits short-term cash flow gaps but is easy to leave running for too long.
Invoice finance
The lender advances part of an unpaid invoice, which helps if clients pay slowly. It costs more than a standard loan, so use it as a bridge and not a long-term habit.
What lenders look at
- Time in business: many lenders want at least six to twelve months of trading. Some will lend to newer businesses at a higher rate.
- Turnover and bank statements: regular deposits show you can service repayments.
- BAS and tax returns: more established lenders ask for these, and for your accountant’s figures if you’re borrowing a larger amount.
- Credit history: both your personal and business credit files can be checked, especially for sole traders.
- Debts and commitments: existing loans, ATO debts and credit cards count against you.
- The purpose: a clear reason, like buying a specific machine, helps.
How to compare offers
- Get the comparison rate. It rolls most fees into one number.
- Add up all the fees: establishment, monthly account fees, early repayment and late payment charges.
- Look at the repayment schedule. Weekly or daily repayments can strain cash flow more than monthly ones.
- Check for a balloon payment at the end of the term.
- Read what happens if you default, including personal guarantees and security.
- Compare total repayments, not just the weekly or monthly figure.
Bank, broker or online lender?
Banks often have the lowest rates but slower approval and stricter checks. Online lenders approve quickly, sometimes in a day, but cost more. A broker can compare several lenders for you and is usually paid a commission by the lender. Ask any broker how they’re paid and which lenders they compare.
Common mistakes
- Borrowing short-term money for a long-term asset, or the reverse
- Choosing on repayment size alone and ignoring total cost
- Signing a personal guarantee without realising what it covers
- Applying to many lenders in a short time, which can hurt your credit file
- Not setting money aside for GST and tax, then borrowing to cover the bill. See our accounting software guide for ways to keep track.
Before you apply
- Decide exactly what the money is for and how much you need.
- Gather your ABN, ID, recent bank statements and the latest BAS or tax returns.
- Work out the repayments against your slowest month, not your best.
- Check your credit report for errors.
- Talk to your accountant about how the loan affects your tax.
Worked example: a $30,000 unsecured loan
This is an illustration, not a quote. A $30,000 unsecured loan over three years at 14% a year would cost roughly $1,025 a month, with about $6,900 in interest over the term. A secured loan for the same amount would usually have a lower rate, but you’d be putting an asset on the line.
Warning signs of a bad lender
- Up-front fees before approval
- Pressure to sign the same day
- Daily or weekly repayments that you didn’t expect
- A repayment figure that doesn’t match the total cost
- Refusal to give the comparison rate or put terms in writing
Alternatives to a loan
- Asking suppliers for longer payment terms
- Invoicing earlier or asking for deposits on big jobs
- An ATO payment plan if you owe tax
- Equipment finance for a specific asset, instead of a general loan. See our equipment finance guide.
Business loans for tradies: FAQs
Can I get a business loan as a sole trader?
Yes. Lenders look at your ABN, trading history, bank statements and credit file, and may ask for security or a personal guarantee.
How long does it take to get a business loan?
Online lenders can approve in a day or two. Banks usually take longer because they ask for more documents.
Do I need a business plan to borrow?
Smaller loans usually don’t need a formal plan, but be ready to explain what the money is for and how you’ll repay it.
Will a business loan affect my personal credit?
It can, especially if you’re a sole trader or you give a personal guarantee. Check how the lender will report it.
Sources and further reading
- MoneySmart: ASIC’s independent money guide
- ASIC: Australian Securities and Investments Commission
- business.gov.au: Australian Government business information
General information only, not financial advice. It doesn’t consider your personal circumstances. Speak with a licensed adviser or your accountant before making decisions. We may earn a commission if you apply through links on this site, at no extra cost to you.