New business and startup loans: how to borrow before you have a track record

Getting a loan for a business that hasn’t traded yet is harder than borrowing for an established one, but it’s far from impossible. Lenders can’t judge a startup on its bank statements, so they judge it on you: your experience in the industry, the plan, how much of your own money is going in, and above all whether there’s property to secure the loan. Get those right and a new business can be funded from day one.

Why are lenders cautious about new businesses?

Most business lending is built on history. Unsecured lenders size facilities on turnover and bank statements, typically between $5k and $500k for trading businesses. A brand-new ABN has neither, so there’s nothing to size.

That doesn’t mean lenders think startups are bad bets. It means the evidence has to come from somewhere else. The shorter the history, the more weight shifts onto security and the person behind the business.

It’s also worth checking public programs alongside private finance. business.gov.au lists a handful of targeted schemes, such as the ACT Microcredit Loan Program for eligible low-income ACT residents starting or growing a business. Eligibility is narrow, so most founders still need a mainstream or private lender for the bulk of their setup costs.

What do lenders look at instead of trading history?

Your experience. A chef with fifteen years in commercial kitchens opening a restaurant is a very different proposition from someone with no hospitality background. Set out your track record clearly.

A realistic plan. business.gov.au notes lenders generally expect a business plan, financial reports and forecasts, along with ID, lease agreements and personal financial information. For a startup, the forecasts need to be grounded: rent, wages, cost of goods and a sensible ramp-up period, not a best-case first month.

Your contribution. Lenders like to see the owner taking a share of the risk. Savings, equity or equipment you’re bringing in all count.

Security. Equity in a home or commercial property is the single biggest factor in funding a new business. Property-secured business loans range from $20k to $5m, as first mortgages, second mortgages or caveats, and they let the lender rely on the asset while the business builds its history. Our home equity business loans page explains how that works.

The basics in place. An ABN, which is free to register through the Australian Business Register, a business bank account, a signed or agreed lease where relevant, and any licences your industry needs.

If you have a plan and some equity to work with, see whether your new venture qualifies in about a minute.

What can a startup loan pay for?

• Fit-out of a shop, clinic, café or workshop (see fit-out finance)
• Equipment and vehicles, where equipment finance secured over the asset itself is often available even to newer businesses
• Opening stock
• Bonds, fees and working capital to carry wages and rent through the first months
• Franchise fees, where franchise finance can draw on the franchisor’s established model

Starting fresh or buying in: which is easier to fund?

	Starting from scratch	Buying an existing business
Trading history	None	Seller’s history can be reviewed
What lenders rely on	Owner experience, plan, security	Business figures, plus owner and security
Unsecured options	Limited until you’ve traded	Sometimes, based on the business’s figures
Main risk lenders see	Will customers come?	Will customers stay after the sale?
Useful page	This one	Business acquisition loans

Many first-time owners find buying an established business easier to finance, because the lender has real numbers to work with. Franchises sit somewhere in between.

When does unsecured finance open up?

Once the business has been banking turnover for a while, unsecured and cash-flow lenders start to take an interest. What helps:

• run every dollar of revenue through the business account
• register for GST if you’re heading towards the threshold; the ATO says most businesses must register once GST turnover reaches $75,000, within 21 days of exceeding it, and lodged BAS becomes strong evidence later
• keep the account out of overdraft and avoid dishonours
• lodge on time from the start

The industry finder shows what lenders tend to look for in your particular sector.

What does startup finance cost?

There’s no standard price, and we don’t publish rates. Every loan is priced on the borrower’s circumstances, and for a startup the main drivers are the security offered, the loan-to-value, the owner’s experience and credit file, the amount and the term. Expect to compare:

• interest over the term
• establishment fees, plus legal and settlement costs on secured loans
• any equipment-specific costs such as a balloon payment on asset finance
• early repayment terms, which matter if you plan to refinance once the business has history

Illustrative example

Illustrative example: A qualified mechanic with twelve years in dealership workshops wants to open his own service centre. He has signed a lease on an industrial unit and needs $150k for hoists, diagnostic equipment, a fit-out and three months of working capital. With no trading history, unsecured lenders can’t help yet. He and his partner have good equity in their home, so a second-mortgage business loan funds the setup, with the lender relying on the security, his experience and a realistic first-year budget. After a year of steady banked turnover he’ll be in a position to look at unsecured options for future equipment. The mechanic workshop guide covers what lenders look for in this kind of business.

Common startup borrowing mistakes

• Borrowing only for the fit-out and leaving nothing for the slow first months.
• Optimistic forecasts that assume full trade from week one.
• Mixing personal and business money, which makes later applications much harder.
• Signing a lease before the funding is sorted.
• Ignoring the cost of tax once the business starts making money.

Got the idea, the skills and the drive? Let’s talk funding

Opening the doors on a new business is a big moment, and having funding lined up, with some breathing room built in, makes every decision after it easier. Tell us about your plans in our short form; it takes roughly 60 seconds and won’t trigger a credit check at that point. We don’t pass your enquiry to a crowd of lenders, so your phone stays quiet apart from us. A real person looks at your experience, your plans and any property you own, then calls to talk through the realistic options. Fill it in as accurately as you can, especially what you’re putting in yourself, and we’ll be able to point you the right way first time.

See if your new business qualifies →