What Is Business Finance? A Plain-English Guide

Business finance is lending arranged for a company or a self employed individual’s trading activity, rather than for personal use. We’re Southern Cross Business Finance, a commercial finance brokerage based in Forest Hill, Melbourne, and we cover everything from a small unsecured loan to a large asset facility. The right structure depends entirely on what the money is for and how the business earns its income.

What separates business finance from personal lending?

Purpose is what separates the two, not size or who signs the paperwork. A loan taken out for a business purpose, whether by a company or a sole trader, is business finance. A loan for a private car or a family home is consumer credit, assessed under different rules. Business finance can move faster and offer more flexible structures, but it can also carry fewer built-in consumer protections, which is exactly why it’s worth understanding what you’re signing.

What are the main categories of business finance?

Most of what we arrange falls into a handful of structures, each suited to a different problem:

1. Term loans, advancing a lump sum on a fixed repayment schedule, typically for a defined purchase or expansion
2.  Lines of credit, a revolving limit drawn against and repaid as needed, suited to timing gaps
3. Asset finance, including chattel mortgage, leasing, hire purchase and rental, where equipment or a vehicle secures its own finance
4. Low doc lending, assessed on bank statements, BAS lodgements or an accountant’s declaration rather than full financial statements
5. Unsecured lending, arranged without an asset pledged, generally faster and priced accordingly

We arrange leasing, hire purchase, rental, chattel mortgage and progress payment packages alongside conventional term and revolving facilities, which covers most of the categories above under one roof.

How do you work out which one fits?

Three questions do most of the work. What is the money actually funding: a specific asset, general working capital, or an ongoing timing gap? How predictable is the spend: one-off or recurring? And what evidence can you currently produce: full financial statements, or something shorter like bank statements and BAS lodgements?

A single equipment purchase usually suits asset finance better than a general business loan, since the asset itself can secure the borrowing. A recurring gap between paying suppliers and being paid by customers usually suits a line of credit better than a term loan. A business that can’t currently produce two years of finalised returns, however well it’s actually trading, is a candidate for low doc lending specifically.

Where does a broker fit into this?

Business finance policy varies by lender and changes without notice. Our job is knowing which lender is likely to say yes to a specific file before it’s lodged, rather than finding out after three declines have already landed on the credit report. Our low doc and general business lending is handled by Jared, a Chartered Accountant with experience advising businesses at some of Australia’s largest accounting firms before moving into business and development funding.

Business finance FAQs

Is business finance only for companies?

No. Sole traders and partnerships can access business finance provided the borrowing is for a genuine business purpose.

What is the difference between secured and unsecured business finance?

Secured finance is backed by an asset we can recover if the loan isn’t repaid, which generally improves the terms available. Unsecured finance carries no pledged asset and is priced for that added risk.

Do I need full financial statements to get business finance?

Not always. Low doc lending exists specifically for businesses that can’t produce two years of finalised returns, using bank statements or BAS lodgements instead.

Talk through your options with us

Business finance isn’t one product, it’s a category, and we can help match the right structure within it to what you’re funding and what you can supply.

We work across Forest Hill, Melbourne CBD and Mornington. Contact Southern Cross Business Finance