Business Finance Review Australia: Is Your Funding Right?

When Did You Last Review How Your Business Is Funded?

How do you know if your business finance structure still suits your business?

Most established businesses don't design their finance structure in one sitting. It builds over time.

A vehicle is financed. Then machinery. An overdraft is added for working capital. A property may be purchased. A short-term facility helps fund a large order. Perhaps ATO debt is put onto a payment arrangement.

Each decision may have made sense at the time.

But five or ten years later, the business can be left with a collection of finance facilities rather than a structure deliberately designed around how it operates today.

That matters even more now that cash rate increases during 2026 have flowed through to higher business lending rates. The RBA's latest published data shows average rates on new business loans of 6.48% for small businesses, 5.45% for medium businesses and 4.90% for large businesses. Business debt growth also remains above its post-GFC average, though a little below the peak reached late last year.

That doesn't mean every business should rush to refinance, but it's a sensible time to ask:

Does the finance structure that worked for your business several years ago still work for the business you operate today?

How Does a Business End Up With the Wrong Finance Structure?

Usually, it doesn't happen because somebody deliberately chose a bad facility, it happens gradually.

A business might initially use an overdraft to manage the timing between paying suppliers and collecting from customers.

Then turnover grows, the debtor ledger gets larger, and inventory increases.

The overdraft that once moved up and down each month is now close to fully drawn most months.

Later, the business buys machinery and adds equipment finance, a difficult trading period creates an ATO liability, and another loan provides breathing room.

Before long, the business has several lenders, different repayment dates, securities and facilities built to solve problems that may no longer exist.

That is where business owners need to stop looking at each loan individually and look at the whole funding structure.

A facility might have a competitive rate, a comfortable repayment or useful flexibility on its own. But the important question is what they are all doing together.

If a business is carrying a permanent working capital requirement in an overdraft constantly at its limit, or repeatedly renewing short-term finance for something that's effectively become permanent, I want to know whether that's still the right structure.

And if long-term debt is repeatedly solving short-term cashflow gaps, simply extending the loan term won't fix what's creating them.

This links directly to the issue I discussed in Your Business Is Profitable. Why Is There Never Enough Cash?.

Before changing the debt, understand what it's funding.

What Are the Signs Your Business Finance May No Longer Fit?

The first is an overdraft or working capital facility that no longer revolves, rising and falling as money moves through the business. If it is permanently sitting near its limit, the business may have developed a larger permanent funding requirement.

The second is repeated short-term borrowing. If a business takes a short-term loan to solve a cash shortage and needs another one six months later, I want to understand why the shortage returned, whether it's debtor timing, inventory, growth or tax debt. Adding another loan without answering that question just adds another repayment.

The third is ATO debt becoming part of the normal funding mix. It doesn't automatically mean a business is financially weak or prevent it from obtaining finance, but if the liability keeps rebuilding while other debt repayments are being met, there may be a structural cashflow issue worth reviewing.

This has also mattered more since ATO General Interest Charge incurred from 1 July 2025 became non-deductible.

I discuss that issue in more detail in ATO Debt vs Business Loan for Australian Business Owners and ATO Tax Debt in Australia? Better Business Funding Options.

Another warning sign is when the business has changed substantially but its finance has not.

A business that once turned over $5 million may now turn over $15 million or $20 million, with more employees, larger customers, longer contracts, more stock and a much larger receivables ledger.

Its funding needs are no longer the same. Growth may be positive, but the structure needs to grow with it.

What Should You Look at When Reviewing Business Finance?

I start by putting every significant facility onto one page.

For each facility, look at: lender, current balance, limit, rate, monthly repayment, remaining term, security, original purpose, balloon or residual (if asset finance), and covenants.

What job is this debt doing today?

Not what it was originally intended to do, but what it's actually funding now.

Equipment finance should generally fund productive assets. Receivables finance suits cash tied up in unpaid invoices, trade finance suits paying suppliers before goods arrive or customers pay, and a term loan suits a longer-term requirement, while an overdraft or revolving facility suits genuine month-to-month fluctuations.

The objective isn't to find one type of finance that does everything, but to match funding to how cash actually moves through the business.

I also look beyond interest rate, which owners understandably focus on because it's easy to compare, though the cheapest rate doesn't always produce the best outcome.

A facility with aggressive principal repayments can pressure cashflow more than a slightly pricier facility over an appropriate term, and a lender may require property security that limits future flexibility.

Rate matters, but so do term, repayments, flexibility, security and purpose.

When Does Restructuring Business Debt Make Sense?

I don't believe businesses should refinance simply because another lender offers a slightly lower rate.

Changing lenders takes time, with establishment costs, valuation fees, legal costs, payout costs and security requirements to weigh up.

Sometimes the right answer is to leave everything where it is.

A review can also identify opportunities.

A review might simplify several short-term facilities into one, extend a loan term too short for the asset it's funding, restructure a permanently drawn overdraft, or reveal that ATO debt costs more than another option. A growing receivables ledger might suit a facility that grows with sales, or reveal the business doesn't need another loan at all.

A manufacturing client of mine is a good example.

They had been growing steadily and had stayed with the same financier for over ten years, the kind of loyalty that usually reflects a good relationship. In this case, it had quietly stopped serving the business.

The client kept flagging their cashflow pressure and changing needs, but there was no regular contact with a relationship manager who understood where the business was heading, and the lender's attention didn't keep up with its growth.

At the same time, the business was paying for services attached to its facilities that weren't doing anything for it.

None of it looked dramatic on its own, but together it meant a growing manufacturer was carrying a finance structure, and a lending relationship, that had fallen behind the business.

A full review moved them to a better-suited lender: more funding with no additional security, the removal of restrictive covenants, and a relationship manager who understood their industry and communicated regularly.

It also introduced something the client hadn't had before: a structured process, with regular meetings between key external advisors to discuss the business, flag industry changes, and plan for facility or funding needs before they arise.

That last part matters as much as the finance itself. A funding structure only stays right for the business if somebody keeps checking that it still fits.

That is why I come back to the same principle:

More debt is not automatically the problem. The wrong debt usually is.

The RBA's most recent data shows that strength has been broadly based across industries, with the industrials and real estate sectors contributing strongly to the recent growth.

The question is whether that debt is making the business stronger, or whether years of separate funding decisions have created a structure that now needs attention.

If you can't explain what each major facility is funding, and why its term and repayment suit that purpose, it may be time to review it.

Talk to Pfitz Financial

Your business finance should support the way it operates today, not the way it operated five years ago.

At Pfitz Financial, I combine over 30 years of commercial finance experience with practical business consulting, helping Australian business owners review their funding and determine whether their structure still makes commercial sense.

I do not start by assuming the answer is a refinance or another loan, I start by looking at the business, the working capital cycle, the existing debt and what each facility is actually doing.

If your business has accumulated several finance facilities over the years, or you're questioning whether your funding still fits, contact Pfitz Financial or book an appointment online for an experienced second set of eyes over your finance structure.