Australian business lending splits into roughly eight product types — and the right one for your situation depends on cash-flow patterns, asset profile, and how predictable next quarter looks. Picking the wrong product can mean paying twice the rate you should, or signing personal guarantees you did not need to.
Working capital vs. overdraft
Both fund short-term cash gaps; they are not interchangeable. An overdraft sits against a transactional account, charges interest only on the drawn balance, and is reviewed annually. A working capital line is usually larger, often facility-fee structured, and sized against accounts receivable or projected cash conversion.
Rule of thumb: if you regularly cycle cash within a 90-day window and need flexibility, an overdraft is cheaper. If you have a 6 to 9-month working-capital gap (e.g. seasonal stock), a working capital facility is structurally better.
Chattel mortgage vs. lease vs. hire purchase
“If you regularly cycle cash within a 90-day window and need flexibility, an overdraft is cheaper. For a 6 to 9-month working-capital gap, a working capital facility is structurally better.
Three products that fund equipment. The differences matter for tax treatment and balance-sheet presentation more than for headline rate. A chattel mortgage gives you ownership from day one with the asset as security; depreciation and interest are deductible. A finance lease keeps the lender as legal owner; payments are deductible but you need a residual value at term. Hire purchase is essentially a chattel mortgage with a different historical accounting treatment.
For most SMEs buying utes, machinery, or fit-out equipment, chattel mortgage is the default. We see leases preferred when balance-sheet optics matter or when the lender will not extend chattel terms long enough.
When to skip the bank entirely
Commercial property investment, equipment over $1M, and time-pressed deals often work better with specialist non-bank lenders. They are more expensive but considerably faster — typical settlement is 7 to 14 days versus 6 to 8 weeks for a major bank.
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