Business Funding Options in Australia Besides a Bank Loan

Australian businesses went looking for finance far more often last year than they did three years ago, and plenty of them didn't go to a bank for it.

The Australian Bureau of Statistics reports that 18% of businesses sought debt or equity finance in 2024-25, up from 5% in 2021-22. That's a steep three-year move. Among the businesses that went looking, 54% approached banks, and 42% approached finance companies. Businesses could name more than one source, so those two figures overlap.

Bank term lending still suits established businesses with property security and clean financials, and for those businesses it's usually the cheapest money available. It's also slow, and it wants real estate behind it. The seven options below work differently. Each one trades something away to do it.

Key Takeaways

Grants and tax incentives don't take equity or charge interest, but they run on published eligibility criteria and fixed application windows. The R&D Tax Incentive isn't a grant at all, it's a tax offset claimed through the company tax return.

Invoice finance and equipment finance are secured against something other than your home. Invoice finance is secured against your debtor ledger, equipment finance against the asset itself.

Equity funding costs ownership rather than interest. Shares are financial products under the Corporations Act, and raising them carries legal and disclosure obligations that debt doesn't.

Merchant cash advances are priced as a flat fee rather than a rate. That makes them hard to compare against a loan, and usually more expensive than one.

Why Businesses Raise Outside Capital

Covering operating costs through seasonal troughs, or through long client payment cycles.

Buying inventory ahead of a peak season, or taking a bulk-purchase discount that pays for the finance.

Replacing vehicles, machinery or technology without draining the cash reserve.

Opening a second site, hiring, or funding a product launch.

Dealing with an ATO liability. From 1 July 2025, the ATO's general interest charge and shortfall interest charge stopped being tax deductible. Interest on a commercial loan used for business purposes generally still is. That gap is the arithmetic behind a lot of refinancing decisions, and the ATO sets out the change on its page about denying deductions for ATO interest charges.

1. Government grants and tax incentives

Federal, state and local programs fund business activity in targeted areas: innovation, exporting, regional employment, commercialisation. Nothing gets repaid. No equity changes hands. What you give up is time and flexibility. Eligibility is assessed against published criteria rather than negotiated, and reporting obligations run for the life of the grant.

Two of the best-known programs work differently from each other, and neither is a straight cash grant.

Export Market Development Grants: Austrade runs EMDG on tiered multi-year grant agreements. There are separate tiers for SMEs getting ready to export, SMEs expanding in existing markets, and SMEs moving into new key markets. Round 4 has closed, and Austrade's page currently shows no rounds open to applications. Check the EMDG page for the next round before you build a plan around it.

R&D Tax Incentive: This one is a tax offset, claimed through the company tax return rather than applied for as a grant. Companies with aggregated turnover under $20 million can access a 43.5 per cent refundable offset. Above that threshold the offset is non-refundable: 38.5 per cent at the base tier, with an intensity uplift to 46.5 per cent. Changes announced in the 2026-27 Budget take effect from 1 July 2028. The business.gov.au program page has the current rules.

Suits: Early-stage commercialisation, R&D-heavy companies, exporters, regional employers.

Watch for: Assessment periods running months, and compliance and audit obligations that continue long after the money lands. A tax offset only becomes cash if the company meets the refundability test.

2. Invoice finance

Invoice finance advances money against unpaid customer invoices. It comes in two forms, and the difference is who chases your customers.

With invoice discounting, you keep control of your ledger and your customers don't know a financier is involved. With invoice factoring, the financier takes over collections and deals with your customers directly. That distinction is easy to skim past and expensive to get wrong, because it decides whether your client sees a finance company's name on a payment reminder halfway through a project you're still delivering for them.

Either way, the security is your debtor ledger. Property stays out of it. The facility also scales with turnover: as you invoice more, more becomes available.

Suits: Wholesalers, recruiters, logistics operators and B2B manufacturers writing 30 to 90 day terms.

Watch for: Fees charged per invoice, the requirement for verified B2B invoices against creditworthy debtors, and the effect on customer relationships if you go the factoring route. Ask what happens when a debtor doesn't pay, because recourse arrangements differ between financiers.

3. Equipment finance and leasing

Equipment finance buys machinery, vehicles or technology using the asset itself as security. The whole appeal sits in that arrangement: no mortgage over the house, no charge over the premises, and no need to explain to a bank why a second-hand excavator is a sensible purchase for an earthmoving business. Lenders will often fund the full price. Repayments run across the asset's working life, commonly two to seven years.

There's a tax angle here, and it needs a date attached. The $20,000 instant asset write-off was law for the year to 30 June 2026. A permanent $20,000 threshold from 1 July 2026 was announced on 12 May 2026 and hasn't passed yet. It sits in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026. The ATO page on the measure tracks its status. Talk to a registered tax agent before you time a purchase around it.

Suits: Construction firms, transport fleets, trades, medical clinics, hospitality.

Watch for: Repossession if you default, and a total cost that exceeds paying cash outright. Whether that trade is worth making depends on what the preserved cash earns you elsewhere.

4. Angel investors and venture capital

Equity funding trades ownership for capital. There are no repayments and no interest, and the investor gets their return when the business is sold or listed.

Angel investors are individuals putting in their own money, usually at seed stage. Venture capital firms invest money raised from other investors. VC cheques are larger, they arrive later, and they commonly come with a board seat attached.

Both routes involve issuing shares, which are financial products under the Corporations Act. Raising equity carries legal, disclosure and valuation obligations that debt doesn't, and the decision is difficult to reverse. ASIC's MoneySmart and business.gov.au cover the basics. A corporate adviser holding an Australian Financial Services licence can advise on a specific raise.

5. Crowdfunding

Crowdfunding raises small amounts from a lot of people through an online platform. Two models operate in Australia and they're regulated differently.

Equity crowdfunding, or crowd-sourced funding, falls under the Corporations Act. Offers go through licensed CSF intermediaries such as Birchal, and retail investors receive unlisted shares. ASIC sets out the framework, including the caps that apply to the company and to each investor, and the offer document the company has to publish.

Rewards crowdfunding isn't a financial product. Backers pre-order a product through a platform such as Kickstarter or Pozible, and the company funds a production run from the proceeds. Platform fees typically sit around 5 to 7 per cent before payment processing.

Both models need a marketing effort to reach the crowd at all, which is the part businesses underestimate: the platform lists your campaign, it doesn't fill it. And a campaign that stalls does so in public. That's a different kind of setback from a declined loan application.

6. Peer-to-peer lending

P2P platforms assess your credit risk, list the loan to their investor base, and fund it once the request is subscribed. Funding comes from investors rather than a bank balance sheet, though many platforms also run institutional funding lines alongside.

The Australian platforms lending to business include Marketlend, OnDeck, ThinCats and Bigstone. Plenti and SocietyOne come up in the same searches, but both operate in consumer personal lending rather than business lending, so their rates aren't available to you.

Suits: Businesses with steady revenue and a clean credit file looking for an unsecured facility priced better than a business credit card.

Watch for: Credit checks that are no lighter than a bank's, and personal guarantees from directors, which are close to standard.

7. Merchant cash advances and lines of credit

These get bundled together because both flex with trading. They're priced on completely different logic, so separate them before you compare.

A merchant cash advance hands over a lump sum repaid as a percentage of daily card takings. Repayments rise in a good week and fall in a quiet one. Providers include Square Loans, Stripe Capital and EFTPOS lenders such as the Tyro Flexi Loan. Not all of these are open to everyone. Stripe Capital, for one, is offered to selected businesses based on their payment history on the platform.

The cost needs care. An MCA is priced as a flat fee rather than an interest rate, so it doesn't compare cleanly against anything else. Stripe's Australian pricing shows fees of A$1,500 to A$2,500 on advances of A$15,000 to A$25,000, repaid at 9 to 15 per cent of daily sales. Short repayment periods push the effective annual cost well above what the headline fee suggests. Work out the total repayable and how long it will take to clear before you compare it against a term loan.

A business line of credit works like an overdraft with an agreed limit. You draw what you need. Interest applies only to the drawn balance, and the facility sits unused at little or no cost the rest of the time. That makes it a better fit for lumpy, unpredictable cash flow than for funding a known purchase.

Suits: hospitality, retail and healthcare businesses with high card volumes, and seasonal operators managing a predictable trough.

Watch for: an MCA's cost if you roll one advance into the next, and a line of credit's tendency to become permanent working capital rather than a buffer.

Which of These Are Realistic

Seven options, but they don't split evenly. For a typical Australian SME turning over a few million with no property to pledge, invoice finance and equipment finance carry the load. Both are secured against something the business already owns, and both are assessed on the quality of that asset rather than on your balance sheet.

A line of credit is the sensible third. Arrange one while trading is comfortable, because a lender likes the application least in the week you actually need the money.

Grants repay the effort where the business already does the thing the program funds. Applying because a program exists, and then reshaping the project to fit the criteria, tends to cost more in staff time and consultant fees than the grant returns.

Equity and crowdfunding sit in a different category altogether, and the comparison isn't really cost against cost. Debt gets repaid and ends. Equity doesn't come back, and the obligations that come with issuing shares are legal rather than financial. That's a decision to take to a licensed adviser rather than to a funding comparison page.

Merchant cash advances solve a real problem quickly and charge accordingly. Treat one as a short-term instrument. Used as ongoing working capital, the cost compounds in a way the flat fee disguises.

Frequently Asked Questions

Can I get invoice finance after 12 months of trading?

Invoice finance is assessed on the strength of your debtor ledger more than on how long you've traded. A 12-month history isn't automatically a barrier. Financiers look at who your customers are, what terms you issue, and whether the invoices cover completed B2B work. Minimum trading periods differ between providers, so check against a specific one.

Can I use alternative funding to clear ATO tax debt?

Yes. A number of Australian business lenders write facilities for exactly this purpose. Two things are worth understanding before you compare them.

From 1 July 2025 the ATO's general interest charge and shortfall interest charge stopped being tax deductible. Interest on a commercial loan used for business purposes generally remains deductible. That gap is the arithmetic behind a refinancing decision.

Separately, the ATO can report business tax debts to credit reporting bureaus where its published criteria are met. Refinancing changes what the debt is. It doesn't remove it. Compare the total cost of the new facility against the cost of an ATO payment arrangement, and get a registered tax agent to run that comparison against your position.

What's the difference between invoice factoring and invoice discounting?

Both advance money against unpaid invoices. Under discounting you keep collecting from your customers and the arrangement stays confidential. Under factoring the financier collects directly, so your customers know. Discounting protects the customer relationship; factoring hands the collections workload to someone else.

Find the Right Funding

Australian businesses have more options than a bank term loan. Which one fits depends on your cash flow cycle, what security you can offer, and how quickly you need the money.

Empire Lending is a referral service for EmpireOne members. We aren't a lender or a broker, and we don't provide credit assistance or financial product advice. Sign up to EmpireOne and we'll connect you with licensed credit providers who can assess your position.

Empire One, Empire Lending, Empire Cover and Empire Advisory are related entities, and this article links to them. The Empire One group receives payment for referrals.

This article is general information about how business funding products work. It doesn't take into account your objectives, financial situation or needs. Tax information is general and sourced from the ATO; speak to a registered tax agent about your own position.