Business Loan Protections in Australia: What Applies, What Does Not
Business Owners
Business purpose credit · Notice and hardship · Unfair terms · AFCA
A business purpose loan is written under a different rulebook from a home loan, and most of the protections people assume are automatic do not reach it. What survives is narrower, and worth knowing before you sign rather than after. This guide sets out what applies, what does not, and where a dispute can actually go.
Quick Answer
A business purpose loan sits outside consumer credit laws, so responsible lending does not apply. Four protections do: the ASIC Act ban on misleading and unconscionable conduct, unfair contract terms rules on standard form contracts, AFCA if the lender is a member, and any code your lender has signed.
Also called: business borrower rights, business loan regulation, small business loan protections, unfair terms in a business loan.
| Your situation | What decides your protection | Read next |
|---|---|---|
| About to sign a loan or a guarantee | Whether the lender is an AFCA member, whether it has signed a code, and what the contract says about default and notice | Five checks before you sign |
| The lender has changed the terms, will not renew, or wants the money back | Whether the lender is a bank bound by the Banking Code, and whether the facility is repayable on demand | Notice a lender must give |
| Behind on repayments, or about to be | There is no statutory hardship process on a business loan, so it turns on the lender's own process and any code it has signed | Hardship on a business loan |
| A guarantee you signed is being called | The guarantee document, the Banking Code's enforcement order where it applies, and AFCA if the lender is a member | Guarantor protections |
| You want to complain or challenge a decision | AFCA membership first, then the order of forums and the time limits | What to do first |
| The business may not be able to pay its debts | This is an insolvency question before it is a finance question | Borrowing near insolvency |
Is a business loan covered by Australia's consumer credit laws?
Generally no: a loan that is predominantly for business purposes sits outside Australia's consumer credit laws, because the test looks at what the money is for rather than at what kind of borrower you are. ASIC's guidance is that credit is caught by the credit legislation where the advance is predominantly for personal, domestic or household purposes, and that predominantly means more than a 50 per cent consumer component. Money drawn to fund stock, equipment, premises or working capital sits outside that, which is why the protections built for consumer borrowers do not travel with it.
The borrowing entity matters too, in one direction only. ASIC states that loans to companies are not subject to the credit legislation, and that only loans to natural persons and strata corporations are caught. A sole trader borrowing for the business is a natural person borrowing for a business purpose, so on that file it is the purpose test doing the work rather than the entity type.
Source: ASIC Information Sheet 101, FAQs: Does the credit legislation apply?, reissued October 2020. Read 21 September 2026. General regulatory guidance, not advice about your facility.
ASIC is blunt about where that leaves a business borrower. Its own words are that the law provides the lowest level of protection to commercial loans, including loans to small businesses. That is a statement about the statutory floor rather than about how any particular lender behaves, and it is the starting point for everything below.
Source: ASIC Information Sheet 207, Disputes about commercial loans, updated 19 April 2024. Read 21 September 2026.
Where the purpose is not obvious from the application itself, a lender will usually ask the borrower to sign a business purpose declaration, and what that document does and does not settle is covered separately in our note on using a caveat loan for personal spending.
Which consumer protections fall away on a business loan, and what replaces them?
On a business purpose loan, three consumer protections fall away: the responsible lending assessment, the test of unsuitability, and compulsory AFCA membership for the lender. What replaces them is the conduct regime in the ASIC Act, the unfair contract terms rules where the contract is standard form, whichever industry code your lender has signed, and the contract and the general law sitting behind it.
AFCA states the consequence plainly. Because the responsible lending provisions do not apply to small business lending, AFCA does not take those provisions, the National Credit Code or RG 209 into account when it assesses a small business loan complaint, and it says there is no test of unsuitability and that the small business lender is not required to make the same level of enquiries as are required for consumer lending.
Source: AFCA, Small businesses with a financial complaint. Read 21 September 2026. AFCA describes how it assesses complaints, which is not the same as a statement of what a lender must do.
| Protection | Consumer credit | Business purpose credit | What applies instead |
|---|---|---|---|
| Responsible lending assessment | Applies | Does not apply | The lender's own credit criteria, plus the ASIC Act warranty of due care and skill |
| A test of unsuitability | Applies | No test of unsuitability | The terms of the contract you signed |
| Level of enquiry into your finances | Set by the responsible lending obligations | Lender not required to make the same level of enquiries | Whatever that lender's own policy requires |
| A licensed lender | Credit licence required | Not required for commercial only lending | ASIC Act prohibitions on misleading and unconscionable conduct |
| External dispute resolution | AFCA membership compulsory | Not legally required, voluntary for some | Internal dispute resolution, ASBFEO, the courts |
| Review of unfair terms | Applies | Applies, where the contract is standard form and the business qualifies | Nothing replaces it, because it survives the change |
Sources for this table: AFCA, Small businesses with a financial complaint (rows 1 to 3); ASIC Information Sheet 207, updated 19 April 2024 (the due care and skill warranty in row 1, and rows 4 and 5); ASIC INFO 211, modified 17 August 2026 (row 6). Read 21 September 2026.
None of this makes the money harder to get or the paperwork lighter. It moves the assessment risk onto the borrower, which is why the questions worth asking before you sign a working capital facility are about the contract and the code rather than about a suitability test that is never going to be run.
Do the unfair contract terms laws apply to your business loan?
Yes, where the loan contract is a standard form contract and the business meets the statutory small business test. This is the protection that survives the move to business purpose credit, and it reaches the contract as a whole rather than only the pricing.
The threshold most often stated wrongly is the money one. For a financial product or service the test is that the upfront price payable under the contract does not exceed $5,000,000, and interest is disregarded when working out that upfront price for the purpose of the cap. It is not a test on the size of the loan. ASIC also notes the other side of that: interest otherwise forms part of the upfront price, and the upfront price itself is not open to an unfairness challenge.
The business test has two limbs and they are alternatives rather than a pair to be satisfied together. At least one party to the contract must employ fewer than 100 people, or have had a turnover of less than $10,000,000 in the last income year.
The two dates that decide which version of the rules you are under
- 12 November 2016 Unfair contract term protections have applied to small business contracts for financial products and services from this date, so a facility written since then has always been within reach of the regime. Source: ASIC, unfair contract term protections for small businesses (INFO 211), page modified 17 August 2026. Read 21 September 2026.
- 9 November 2023 From this date the reforms made unfair terms illegal and penalty bearing rather than merely voidable, with each unfair term forming a separate contravention. Source: ASIC news item, Unfair Contract Terms reforms commence, 9 November 2023. Read 21 September 2026. The date a contract was made or renewed decides which version applies to it.
Both dates are regulatory commencement dates, not dates about your facility. Whether a particular term in your contract is unfair is a question for a court or for AFCA, not for a broker.
The second thing commonly stated wrongly is where to take it. A business loan is a financial product or service, so the regulator for unfair terms in a loan contract is ASIC, not the ACCC. The order that actually gets a business borrower somewhere is the lender's internal dispute resolution first, then AFCA if the lender is a member, then ASBFEO, then a court. Reporting misconduct to ASIC is worth doing and is not a remedy for you.
If a term is found unfair, a court can declare all or part of the contract void, vary the contract, refuse to enforce a term, stop the same or a substantially similar term being used in future, require the provider to publish specified information, and direct a refund or the provision of services. ASIC's own examples of terms that may be unfair include a default fee set beyond what is required to protect the lender from loss, and a broad right to vary any term in unspecified ways without a reasonable way out for the borrower.
Source: ASIC INFO 211, page modified 17 August 2026. Read 21 September 2026. What a lender can reach if it does enforce is a separate question, set out in our guide to unsecured business loans and what lenders can take.
Knowing the test is less useful than knowing where to look. ASIC's review of small business loan contracts produced a practical shortlist of clauses that raise concerns, and it is the list worth reading against your own contract before you sign.
| Clause | Why ASIC flagged it | What to check in your contract |
|---|---|---|
| Material adverse change default | Lets the lender call a default on an unspecified negative change, even when every repayment is made | Whether any default can be triggered by a change in circumstances rather than a defined event, and who decides it has happened |
| Broad non-monetary defaults | Events of default described so generally that the lender has wide discretion to treat almost anything as a default | Whether each non-monetary default is specific, material and able to be fixed, and how long you have to fix it |
| Financial indicator covenants | A ratio test, such as loan to value, where every breach is a default even without a material credit risk | Which ratios apply, when they are measured, and whether a breach must actually threaten repayment or security |
| Unilateral variation | Lets the lender change the terms for any reason without your agreement, notice or a way out | What can change, how much notice you get, and whether you can repay and exit without a penalty |
| Entire agreement clauses | Stops you relying on what the lender told you outside the written contract | Whether anything you were promised before signing is written into the contract |
| Broad indemnities | Makes you cover losses caused by the lender's own fraud, negligence or misconduct | Whether the indemnity excludes losses the lender, its staff or a receiver caused |
| Default fees | ASIC gives an excessive default fee, beyond what protects the lender from loss, as an example of a term that may be unfair | What triggers each fee, whether it repeats, and how it compares with the lender's likely loss |
Sources: ASIC Report 565, Unfair contract terms and small business loans, March 2018, which sets out the types of loan terms that raise concerns and gives guidance to all lenders to small business; ASIC, unfair contract term protections for small businesses, modified 17 August 2026 (default fees). Read 21 September 2026. A flagged clause is not automatically unfair: the test looks at the contract as a whole, and only a court can declare a term unfair.
What counts as a small business, and why the answer changes with the regime?
There is no single definition, so the same business can qualify under one regime and fail another on the same numbers. Unfair contract terms law uses fewer than 100 employees or turnover under $10 million; AFCA uses fewer than 100 employees, counted across the group; the Banking Code needs turnover under $10 million, fewer than 100 full time equivalent employees and less than $5 million in total debt; and the AFIA Code, from 1 October 2026, mirrors the unfair contract terms test. The four are set out side by side below.
| Regime | The test | How it is measured | What it gets you | Source and date |
|---|---|---|---|---|
| ASIC Act unfair contract terms | Fewer than 100 employees or turnover under $10,000,000 last income year, and upfront price under $5,000,000 | At the time of contracting, with interest disregarded for the price cap | The right to have an unfair term struck out, and penalties against the provider | ASIC INFO 211, modified 17 August 2026 |
| AFCA | Fewer than 100 employees, whether a primary production business or otherwise | At the time of the events complained about, with wage records where numbers fluctuate, and a group of 100 or more excluded | Free external dispute resolution and determinations binding on the firm, where the lender is an AFCA member | AFCA, small business page, read 21 September 2026 |
| Banking Code of Practice 2025 | Turnover under $10 million in the previous financial year, fewer than 100 full time equivalent employees, and less than $5 million total debt to all credit providers, counting undrawn limits and the loan being applied for. All three must be met. | When the banking service is obtained, applied to the whole business group, with joint borrowers assessed together | Code obligations from subscribing banks only, including 30 days' notice before enforcing for a missed payment and financial difficulty help | ABA, 2025 Banking Code of Practice, Part E, effective 28 February 2025 |
| AFIA Finance Industry Code, from 1 October 2026 | Mirrors the unfair contract terms test in the first row | By the subscribing member | Code obligations from AFIA members that have transitioned to the new Code | AFIA, published 16 September 2025, effective 1 October 2026 |
The practical consequence shows up in group structures. A company with fewer than 100 employees of its own can sit outside AFCA's jurisdiction because the group it belongs to employs 100 or more, while the same company may still be a small business for unfair contract terms purposes on the turnover limb. Where employee numbers move around the threshold, AFCA will ask for substantiation such as wage records for the time of the events giving rise to the claim.
If you are still working out which facility you have actually been offered, the shapes and what each one is for are set out in our working capital loans guide.
Can you complain to AFCA about a business loan, and what are the limits?
Yes, if three things are true at once: the business qualifies as a small business on AFCA's test, the credit facility is within AFCA's jurisdictional limit, and the lender is an AFCA member. The third is the one most borrowers check last, and it is the one that decides whether any of the rest matters.
AFCA defines a small business as an organisation with fewer than 100 employees, which can be a sole trader, a partnership, an incorporated business, an incorporated trustee or a company, whether a primary production business or otherwise. Registered charities are considered regardless of employee numbers. The exclusion that catches people is the group one: AFCA cannot consider the complaint where the group of related companies employs 100 or more.
The facility limit is the figure most often quoted wrongly. AFCA's Rules carry a base of $5 million for a small business credit facility, subject to an adjustment mechanism, and the figure actually in force for complaints lodged on or after 1 January 2024 is $6,317,000, which AFCA rounds to $6.3 million on its own pages. A source quoting five million without saying it is the base is quoting the base rather than the operative limit.
AFCA's limits and caps, for complaints lodged on or after 1 January 2024
- $6,317,000 The jurisdictional limit on a small business credit facility. AFCA cannot consider a complaint about a facility above it, and states the limit on its small business page as $6.3 million. Source: AFCA, incoming adjustments to monetary limits and compensation caps, published 28 November 2023, and AFCA's small business page. Read 21 September 2026.
- $1,263,500 The compensation cap on a small business loan claim, where the credit facility is less than $6.3 million. A primary producer loan carries $2,526,500. Source: AFCA, How we resolve complaints and our Rules. Read 21 September 2026.
- Unlimited The cap where a guarantor has offered their home as security. In the Rules table this is a claim by a guarantor to set aside a guarantee supported by security over the guarantor's principal place of residence. Source: AFCA, How we resolve complaints and our Rules, and the adjustment table published 28 November 2023. Read 21 September 2026.
- $631,500 The cap on most other claims of direct financial loss, with $6,300 each for indirect financial loss and for non-financial loss per claim. Interest and limited costs may be awarded on top of these caps. Source: AFCA, How we resolve complaints and our Rules. Read 21 September 2026. AFCA adjusts these every three years in line with indexation under ASIC Regulatory Guide 267, so check the figure in force when you lodge.
These are scheme limits, not an indication of what any complaint is worth. Nothing here is a statement about the outcome of a complaint about your facility.
There is also a line about what AFCA will look at. It cannot generally consider a complaint about the level of a fee, premium, charge, rebate or interest rate where the borrower is simply unhappy that a cost has increased. It can consider one where a fee or charge was not disclosed, was misrepresented, or was not calculated correctly, which is a different complaint with the same subject matter.
Membership is the gate. AFCA membership is compulsory for licensed financial services providers and Australian credit licensees under their licence conditions, and other firms join voluntarily. AFCA points borrowers to its own member search and to ASIC Connect for information about a firm, and notes that membership is not an endorsement of that firm. If you are unsure what kind of lender is in front of you, our glossary entry on the non-bank lender is the place to start.
AFCA has put a number on the cost of skipping that check. In the 2024 to 25 financial year it closed 2,063 small business complaints about finance, 21 per cent of them because they fell outside its rules, and it says a large proportion of those could not be considered because the lender was not a member. AFCA's own advice is to ask whether a small business lender is an AFCA member when you apply.
Source: AFCA media release, AFCA cautions against unregulated lending, as small business complaints reach record high, 29 October 2025. Read 21 September 2026.
An accepted AFCA complaint does more than get you a hearing. During the complaint process the financial firm must not begin legal proceedings against the complainant relating to the complaint, must not pursue debt recovery proceedings started before lodgement except to the minimum extent necessary to preserve its legal rights, and must not recover the debt that is the subject of the complaint, protect the assets securing it, assign the right to recover it, or list a default on a credit file.
Two qualifications travel with that. AFCA may consent to the firm taking certain action while the complaint remains open, by imposing conditions. And the firm can continue to charge interest while the complaint is being considered, so a pause on recovery is not a pause on the debt.
Source: AFCA, How we resolve complaints and our Rules. Read 21 September 2026. This applies where AFCA has accepted a complaint against a member firm, which is why membership is the first thing to check.
AFCA also has time limits. For most complaints you need to lodge within two years of the lender's internal dispute resolution response, or within six years of when you first became aware, or should reasonably have become aware, of the loss, whichever comes first. AFCA may extend these in special circumstances, which is not something to plan around.
Source: AFCA, The process we follow. Read 21 September 2026.
AFCA can also look at whether a business loan should have been made at all, even though responsible lending does not apply. Its Approach to Lending to Small Business, published in January 2024, says it considers the laws and codes that applied to that particular lender when it made the lending assessment, which differ with the type of lender, the product and how it was distributed, and that the Approach creates no new obligations. In one of its case studies the lender had signed no code, so AFCA found it had no duty to act as a diligent and prudent banker; AFCA still found that any assessment would have shown the borrower could not repay without selling her home, and that the lender had engaged in unconscionable conduct. AFCA's 2024 to 25 small business review describes a complaint by a guarantor that a company loan should not have been provided, where the National Credit Code did not apply because the borrower was a company.
Sources: AFCA, The AFCA Approach to Lending to Small Business, January 2024; AFCA, small business complaints, Annual Review 2024 to 25. Read 21 September 2026. AFCA states that no determination is a precedent and each complaint turns on its own facts. If you are weighing this kind of complaint, keep the application, the financial information the lender had, and every question it asked you.
What do the Banking Code and the AFIA Code promise, and who is bound by them?
A code binds only the lenders that sign it. Banks that subscribe to the 2025 Banking Code of Practice, in effect since 28 February 2025, owe small business customers and their guarantors commitments the law does not require, and AFIA members take on the new Finance Industry Code of Practice from 1 October 2026 once they transition. A non-bank lender that has signed neither owes you what the contract and the general law say.
The 2025 Banking Code of Practice was approved by ASIC on 27 June 2024 and replaced the version dated 5 October 2021. A business is a small business under it when all three of these are true of the business, or of its business group: turnover under $10 million in the previous financial year, fewer than 100 full time equivalent employees, and less than $5 million in total debt to all credit providers, counting undrawn limits and the loan being applied for. The Australian Banking Association describes the lift of that debt limb from $3 million to $5 million as bringing an additional 10,000 small business customers inside the Code. It is a condition of ABA membership that member banks with a retail presence in Australia sign up to the Code, and the banks that have adopted it are listed on the ABA's website.
For a small business borrower, most of what the Code adds is notice and process: at least 30 days' notice of a missed payment before the bank demands full repayment or starts enforcement, help if the business is in financial difficulty, and a decision in writing. Both are set out in the next two sections.
For a guarantor the Code adds two pre signing steps worth knowing by number, and each has an exception that matters to business owners. Before accepting a guarantee the bank will take reasonable steps to ensure a meeting is held with the guarantor to discuss being a guarantor (paragraph 109), but the meeting step does not apply to a director guarantor, including a sole director, or where the guarantor or their lawyer confirms independent legal advice (paragraph 111). The bank will not accept the guarantee until the third day after the guarantor is given the specified information (paragraph 112), but a sole director guarantor is excluded and any other director guarantor may choose to sign earlier (paragraph 113). Most business owners guaranteeing their own company's loan are director guarantors, so they usually get neither step. If a guarantee is later called, the Code generally requires the bank to enforce the borrower's own security first, a commitment the AFIA Code makes only in its consumer schedule, and the rest of that process is covered in our guide to a personal guarantee being called.
Source: Australian Banking Association, 2025 Banking Code of Practice, paragraphs 109 to 113 and 124 and the Part E definition of Small Business, and the ABA's summary of the expanded definition. Read 21 September 2026. The Code describes what subscribing banks promise, not what the law requires, and it is written by the ABA, the banks' industry body.
Where the security offered is the family home the stakes of those steps change entirely, and that is dealt with in our guide to using the family home as security for a business loan.
The AFIA side is the freshest fact on this page and it is a transition in progress rather than a completed change. A single AFIA Finance Industry Code of Practice was published on 16 September 2025 and takes effect on 1 October 2026. Its small business test mirrors the unfair contract terms test, and compliance is monitored by an independent Finance Industry Code Compliance Committee appointed by the AFIA Board and operating separately from the industry association. Members previously signed up to AFIA's predecessor codes keep those protections for anything that occurs until the member becomes a member of the new Code.
Two limits on the AFIA Code matter to business owners. It does not apply to finance for commercial property customers, to lenders that mainly finance large trucks, machinery and equipment made by their own company group, or to lenders already bound by the Banking Code or the Customer Owned Banking Code. It applies to new products and guarantees entered into from 1 October 2026, or from when the lender joins. The Code is now at version 2.0, dated December 2025, and AFIA publishes its list of Code Members.
Source: AFIA, small business finance and Finance Industry Code pages, and the AFIA Finance Industry Code of Practice, version 2.0, December 2025, paragraphs 1, 5, 6, 9 to 11, 19 and 20, clause 1.51, and Schedule 3. Read 21 September 2026. Cited inline because AFIA is the industry body that writes the Code. This page should be re read after 1 October 2026, because the Code takes effect shortly after publication.
If your lender signs neither code, no code applies to your loan at all. That is not the same as having nothing, because the ASIC Act conduct rules and the unfair contract terms regime do not depend on membership of anything. What you lose is the pre signing guarantor process and the code level complaints handling promises, and you lose them quietly, because nobody sends a letter saying so.
How much notice must a lender give before it changes, calls in or ends a business loan?
A bank bound by the Banking Code must give a small business at least 30 days' notice of a missed payment before it demands full repayment or starts enforcement, and paying the overdue amount inside that period stops it. A non-bank bound by the AFIA Code, from 1 October 2026, commits only to a notice to remedy within a period your contract sets, and a lender that has signed neither code owes whatever notice the contract says.
| What the lender wants to do | Bank bound by the 2025 Banking Code | Non-bank bound by the AFIA Code, from 1 October 2026 |
|---|---|---|
| Demand repayment or enforce for a missed payment | At least 30 days' notice of the payment failure, and no demand or enforcement if the overdue amount is paid inside that period, unless you or a guarantor is insolvent or there is a material and immediate risk (paragraphs 82 to 84) | Generally a notice to remedy within a specific period set by your contract, and possibly no notice where the law or the contract does not require one (Schedule 3, clause 3.26) |
| Act on a default other than non payment | A notice of the default and at least 30 days to remedy it where it can be remedied, and only for listed defaults that are material (paragraphs 87 to 90) | A notice of the grounds and reasonable time to remedy it where it can be remedied, unless that is unreasonable, for example where the asset may be disposed of (clauses 3.27 and 3.28) |
| Rely on a general material adverse change clause | Not in standard form small business loans, although property development and specialised loans can carry tailored covenants (paragraphs 91 and 92) | The Code contains no equivalent commitment, so the contract governs |
| Call in an overdraft or other on demand facility | No notice may be required (paragraph 85) | No specific commitment, so the contract governs |
| Decline to extend a loan not fully repaid by its term | At least 3 months' notice if you are not in default, and no obligation to extend on the same terms (paragraphs 93 and 94) | A reminder of the termination date that leaves a reasonable time to find other finance, with no fixed period, and no obligation to extend on the same terms (clauses 3.23 and 3.24) |
| Change fees or other terms against you | At least 30 days' prior notice, other than interest rate and repayment changes, subject to exceptions (paragraphs 36 and 37) | Reasonable endeavours to give 30 calendar days' prior notice of changes to the product or key terms, excluding changes to facility limits (clause 3.19) |
| Change an interest rate | No later than the date of the change, unless the rate is variable, floating or tied to an external reference rate (paragraph 35) | The same commitment, where the contract permits the change (clause 3.20) |
Sources: ABA, 2025 Banking Code of Practice, paragraphs 35 to 37 and 82 to 94; AFIA Finance Industry Code of Practice, version 2.0, December 2025, Schedule 3, clauses 3.19 to 3.28. Both read 21 September 2026. Each binds its signatories only. The Banking Code applies to banking services entered into on or after 28 February 2025, and the AFIA Code to new products and guarantees entered into on or after 1 October 2026 or from when the lender joins; older facilities keep their existing terms where those terms conflict.
Two rows matter more to business owners than the rest. An overdraft or other on demand working capital facility can be called without notice under either code, which is the practical reason to know which kind of facility you hold before trading conditions change. And a loan that is interest only or ends in a balloon has to be repaid or refinanced at its term: a bank must give three months' notice if it will not extend, while an AFIA Code member commits only to a reminder, so your runway may be shorter than you think. What changes when a long standing bank says no is covered in our guide to being declined after years with the same bank.
Before you sign with any non-bank lender, find three clauses: the events of default, the notice or cure period for each, and whether any part of the facility is repayable on demand. With an AFIA Code member those clauses set the notice period the Code refers to; with a lender bound by neither code they are the whole of it. Either way, the unfair contract terms rules are the check on them.
Can you get financial hardship help on a business loan?
A business loan does not get the statutory hardship process, because that process sits in the consumer credit legislation a business purpose loan falls outside. If your lender is a bank bound by the Banking Code, its financial difficulty commitments do apply to small businesses: contact the bank as early as you can, it will work with you case by case, and it must tell you in writing whether it will help and why. A non-bank bound by the AFIA Code, from 1 October 2026, commits to something weaker: it may consider reasonable changes to your repayments or terms within its credit policies, but is not required to. With a lender bound by neither code, ask for its financial difficulty process in writing.
Where the position can be recovered, the Code gives examples of help such as interest only payments for a short period, extending the loan term to reduce repayments, and temporarily postponing or deferring payments, and it notes these can mean paying more interest over the term. Where recovery is unlikely, the options it describes include an alternative arrangement, changed loan terms, time to sell a property, or information about insolvency arrangements. You can ask the bank to deal with your financial counsellor or representative instead of you, and a small business in default will be told if the bank reports a payment default to a credit reporting body.
Sources: ABA, 2025 Banking Code of Practice, Part D, paragraphs 167 to 186, which Part D states apply to small businesses as well as individuals; AFIA Finance Industry Code of Practice, version 2.0, December 2025, paragraphs 63 to 65 and 72. Both read 21 September 2026. Neither code obliges a lender to agree to any particular arrangement.
Timing matters as much as the request. A hardship conversation started before the first missed payment happens inside the ordinary relationship; one started after a default notice happens inside the 30 day window in the section above. If the lender is an AFCA member and a request is refused or ignored, AFCA puts a complaint that primarily involves financial difficulty on a shorter track, giving the firm up to 21 days to work with you directly rather than the usual 30.
Source: AFCA, How we resolve complaints and our Rules. Read 21 September 2026.
Free help for small business owners is available through the Small Business Debt Helpline. If the real question is whether the business can pay its debts at all, read the section on borrowing near insolvency first, because a hardship arrangement does not answer it. Where several facilities are straining cashflow at once, how combining them works, and when it does not help, is covered in our guide to business debt consolidation.
What protections does a guarantor have when the lender signs no code?
Without a code, a guarantor still has the ASIC Act conduct rules, possibly the unfair contract terms regime over the guarantee document itself, and, where the lender is an AFCA member, the strongest cap in the scheme: the compensation cap is unlimited where a guarantor has offered their home as security. In the Rules table that appears as a claim by a guarantor to set aside a guarantee supported by security over the guarantor's principal place of residence. Every other cap in the scheme is a number, and that one is not.
A guarantee and a mortgage are different documents, and it helps to know which you signed. A guarantee makes you personally liable for the borrower's debt; a mortgage gives the lender security over a specific property; some transactions include both. Our glossary entry on the director's guarantee explains the first.
Source: AFCA, How we resolve complaints and our Rules, and the compensation cap table published 28 November 2023. Read 21 September 2026. The cap is a limit on what can be awarded, not a prediction of any outcome, and it depends on the lender being an AFCA member.
The unfair contract terms rules bite on standard form contracts for financial products and services, and the loan agreement is not the only such contract in the bundle. The guarantee and the security schedule are separate documents with their own terms. Whether a specific guarantee is caught by the regime turns on that contract and the parties to it, which is a question for your solicitor rather than for a broker.
Independent legal advice does one thing reliably and one thing not at all. It removes the argument that you did not understand what you were signing, and under the Banking Code it is one of the exceptions to the three day waiting rule described above. It does not reduce what you owe if the guarantee is called, and it is not a substitute for the lender being in a scheme you can complain to.
What you keep, whatever your lender has signed
- The ASIC Act prohibitions on misleading and unconscionable conduct
- The unfair contract terms regime over a standard form contract
- An unlimited AFCA cap on a claim to set aside a guarantee over your home, where the lender is a member
- The right to read every document, in full, before signing
- Your own solicitor, on your own instructions
What you do not get
- A code meeting or a waiting period, unless the lender subscribes to a code
- A responsible lending assessment of the borrower
- A statutory test of unsuitability
- Free external dispute resolution, where the lender is not an AFCA member
- A regulator that will recover your money for you
From our broking, indicative
The part of this that borrowers and guarantors most often discover late is not the law, it is the paperwork order, and it is visible on the day rather than in the contract.
- The guarantee and the security schedule are separate documents from the loan contract, and in practice they are usually signed in the same sitting as it. Reading them as one document is how a guarantor ends up having read only the first.
- The documents arrive in a sequence, and the sequence is not chosen for the guarantor's benefit. Asking which documents are still to come, before signing the first, changes what can still be negotiated.
- Checking whether a lender is an AFCA member, and whether it has subscribed to a code, takes minutes and is the only part of this that is entirely within your control. It is also the part that decides where a dispute can go for the whole life of the facility.
Indicative only, based on transactions we have worked on. Not a quote and not an offer, and not a statement about approval likelihood, timing or cost. Not legal advice: the effect of a guarantee you have been asked to sign is a question for your solicitor.
What the guarantee document itself does, and what happens when one is called, are dealt with separately in our guides to the director's guarantee and to a personal guarantee being called.
Who regulates a business lender that holds no credit licence?
ASIC regulates the conduct of a lender that writes only business loans, under the ASIC Act, but that lender does not need a credit licence and does not have to belong to AFCA. Those are three separate facts, and they are easy to run together.
ASIC states that lenders providing only commercial loans are not required to have a credit licence and are not legally required to be a member of AFCA. What still applies to them is the ASIC Act: the implied warranty that a financial service will be provided with due care and skill, the prohibitions on misleading and unconscionable conduct, and the unfair contract terms regime over standard form contracts. Conduct rules, in other words, with no licence sitting behind them to condition or suspend.
Three further layers sit around a commercial lender, and each of them does something narrow.
What else sits around a commercial lender, and what each one is actually for
- AUSTRAC Loans or finance, including hire purchase, is a designated service, so a provider with a geographical link to Australia is a reporting entity with anti money laundering and counter terrorism financing obligations and must enrol. This is a financial crime obligation and it will not help you with a contract dispute. Source: AUSTRAC, Who and what we regulate. Read 21 September 2026.
- ASBFEO Assists small businesses in dispute with another business or a Commonwealth agency. It is an assistance body, not an enforcement one, and the section below sets out exactly what it can and cannot do. Source: ASBFEO, How we help. Read 21 September 2026.
- Code monitoring A subscribing bank is monitored against the Banking Code by its code compliance body, and an AFIA member will be monitored by the independent Finance Industry Code Compliance Committee once it has transitioned. Neither body monitors a lender that has signed nothing. Source: Australian Banking Association and AFIA, read 21 September 2026. Code monitoring reaches subscribers only, which is the whole point of checking first.
- Checks you can run Before signing: the AFCA member search, ASIC Connect for information about the firm, the ABA's list of banks that have adopted the Banking Code, and, for a non-bank, the lender's written answer on which code it has signed. AFCA notes that membership of AFCA is not an endorsement of a firm or its services. Source: AFCA, Complaints AFCA can deal with. Read 21 September 2026. These confirm membership and registration, not the quality or the pricing of an offer.
This is a map of who is watching what, not a safety rating of any lender. None of these bodies reviews a loan offer before you sign it.
In plain words: for a lender writing only commercial loans there is no credit licence to lose, no compulsory scheme to answer to, and no regulator that will reopen your contract on your behalf. That is not a reason to avoid non-bank credit, which is a normal and often necessary part of business finance, and it is a reason to do the checks above while you still have the choice. How this plays out at the private end of the market is covered in our guide to private mortgage lenders.
What should you check before you sign a business loan or a guarantee?
Check five things before you sign, in this order: whether the lender is an AFCA member, whether it has signed a code, what counts as a default and how much notice you get, whether any part of the facility is repayable on demand, and exactly what the guarantee and security documents cover. Each takes minutes, and together they decide where you stand for the life of the facility.
| Check | How to do it | What the answer tells you |
|---|---|---|
| 1. AFCA membership | Search AFCA's member list by the lender's legal name | Whether you have free external dispute resolution, the complaint freeze and the AFCA caps (AFCA limits) |
| 2. Code status | Check the ABA's list of banks that have adopted the Banking Code or AFIA's list of Code Members, and ask the lender in writing which code, if any, applies to your loan | Whether the notice, hardship and guarantor commitments above apply at all |
| 3. Default and notice clauses | Read the events of default and the notice or cure period for each | The notice regime you actually have, especially with a non-bank lender |
| 4. On demand terms | Ask which parts of the facility, if any, are repayable on demand | Whether a limit can be called without notice |
| 5. Guarantee and security | Ask for every document before you sign the first, and read the guarantee and security schedule as separate documents | What you personally stand to lose, and whether to take independent legal advice before signing |
Sources: AFCA, Complaints AFCA can deal with; ABA, 2025 Banking Code of Practice. Read 21 September 2026. These checks confirm status and terms. They are not a view on whether an offer suits you, and the effect of a guarantee is a question for your solicitor.
If you are not sure whether the lender in front of you is a bank at all, start with our glossary entry on the non-bank lender. A broker can run the first two checks with you before an application goes in, and can compare how different lenders word their default and on demand clauses. The rest belongs to your solicitor and your accountant.
What should you do first when something goes wrong with a business loan?
Put a complaint to the lender in writing, ask for copies of your documents, and diarise every date before you do anything else. A written complaint starts the lender's internal dispute resolution, which AFCA expects to have happened before it looks at a complaint, and the dates decide whether AFCA can still hear it.
| Step | What to do | Why it matters |
|---|---|---|
| 1. Check the lender | Confirm AFCA membership and code status, using the checks above | It decides which of the later steps exist for you |
| 2. Complain in writing | Set out what happened, the dates, the loss and the outcome you want, and keep a copy | It starts the lender's internal dispute resolution. A bank bound by the Code must explain any delay and tell you about AFCA if it cannot resolve the complaint within 30 days |
| 3. Ask for your documents | Request the contract, security documents, statements and any notices the lender has given you | A bank bound by the Banking Code must give you copies within 30 days of the request; an AFIA Code member commits to 14 days for a loan under a year old and 30 days otherwise |
| 4. Keep the debt separate from the dispute | Keep up payments where you can, and raise financial difficulty early and separately if you cannot | A complaint does not stop interest, including while an AFCA complaint is open |
| 5. Escalate on time | AFCA if the lender is a member, otherwise ASBFEO and your solicitor | AFCA generally needs the complaint within two years of the lender's response, or six years of becoming aware of the loss, whichever is first |
| 6. Do not sign new documents under pressure | Take any variation, forbearance or guarantor document to your solicitor first | A new signature can change your position, including a guarantor's. For a director asked to sign as guarantor, our guide to the director's guarantee covers what the document does |
Sources: ABA, 2025 Banking Code of Practice, paragraphs 22 and 199; AFIA Finance Industry Code of Practice, version 2.0, December 2025, clause 3.21; AFCA, The process we follow and How we resolve complaints and our Rules. Read 21 September 2026. Code obligations bind subscribing banks only.
What can you actually do when the lender is not an AFCA member?
Without AFCA, the route is the lender's internal complaints process, then ASBFEO for assistance and access to low cost legal advice, then a court, which is the only forum that can compel an outcome against a lender that has joined nothing. The unfair contract terms regime and the ASIC Act conduct rules still apply, and misconduct can be reported to ASIC, although ASIC will not recover money for you. The table sets out what each forum can and cannot do, including AFCA for comparison.
| Forum | Who it covers | What it can order | What it cannot do |
|---|---|---|---|
| The lender's internal dispute resolution | Any borrower of that lender | Whatever the lender agrees to | Bind the lender to anything, or give you a decision maker outside it |
| AFCA | Small business complainants against member firms, facility within the limit | Determinations binding on the firm, including forgiving or varying a debt and releasing security | Consider a complaint against a non-member, or one only about a cost having increased |
| ASBFEO | Small businesses in dispute with another business or a Commonwealth agency | Nothing directly, it assists, equips and arranges | Enforce, compel a party, or decide the dispute |
| ASIC | Reports of misconduct about a broker, lender or receiver | Regulatory action in its own name | Recover your money or reopen your contract for you |
| Farm debt mediation | Farming businesses, in the states where a scheme applies | A mediated outcome under that state's scheme | Apply outside farming, or outside those states |
| Court | Any party to the contract | The unfair contract terms remedies, including declaring a term void and varying the contract | Offer a free or informal route, or move at the pace of a business |
Sources for this table: ASIC Information Sheet 207, updated 19 April 2024 (internal dispute resolution, ASIC and farm debt mediation); AFCA, read 21 September 2026; ASBFEO, How we help, read 21 September 2026; ASIC INFO 211, modified 17 August 2026 (court).
ASBFEO is the step most often misunderstood, usually upwards. In its own description it assists small businesses and family enterprises in dispute with another business or a Commonwealth agency by encouraging the parties to work together with an eye on their longer term interests, by equipping the business to resolve the dispute in a timely and low cost way including access to low cost legal advice, and by arranging alternative dispute resolution from its practitioner list. It may also refer a matter to a more appropriate agency. Its Information Line is published on its site. It does not enforce and it does not decide.
There is a useful asymmetry in AFCA's powers worth pairing with the fee and rate exclusion in the AFCA section. AFCA will not hear a complaint that is only about a rate or a fee being high, and yet among the actions it may require of a firm are forgiving or varying a debt, releasing security over a debt, and repaying, waiving or varying a fee or other amount, including varying the applicable interest rate on a loan. The gate is what the complaint is about, not what the remedy touches.
Court is the fallback rather than the plan. It is where the unfair terms remedies actually live, and it is the only forum on the list that can compel an outcome against a lender that has joined nothing.
Is it risky to borrow when the business may already be insolvent?
Borrowing does not fix an insolvent business. New credit written against the same trading position moves the problem rather than solving it, and usually enlarges it. Whether a business can pay its debts as and when they fall due is not a question a finance broker can answer for you, and it is not a question that improves by being left. If that is the live question, the first conversations are with your accountant and with a registered insolvency practitioner, and free assistance for small business is available through the Small Business Debt Helpline.
Three specific pressures sit next to that question, and each has its own page because none of them is a finance question: a director penalty notice, a statutory demand, and what happens when a receiver is appointed to your company. None of them is improved by a new application, and all of them run to their own clocks.
This section names the risk and stops there deliberately. Directors' duties, safe harbour and restructuring are matters for a qualified insolvency adviser and a solicitor, and nothing on this page should be read as advice about any of them.
A business purpose loan is not an unprotected loan, it is a differently protected one. The consumer credit machinery is gone, and what replaces it is thinner but real: conduct rules that do not depend on anybody's membership of anything, an unfair contract terms regime that reaches the standard form contract and survives the move to business purpose credit, and whichever industry code your lender chose to sign.
The variables you control are all at the front. Whether your lender is an AFCA member and whether it subscribes to a code are both checkable in minutes, both free, and both decide where a dispute can go for the entire life of the facility. If something has already gone wrong, the order is a written complaint, your documents and the dates, then AFCA or ASBFEO.
Where a broker fits: we can run the lender and code checks with you before you sign, compare how lenders word their default and on demand clauses, and look at refinancing where a facility is not being extended. We cannot run a complaint or a dispute for you; that is your solicitor, AFCA or ASBFEO.
Key takeaway: check AFCA membership and code subscription before you sign, because once you have signed they stop being choices.Frequently asked questions
No. The lender is not required to make the same level of enquiries as are required for consumer lending. What governs the deal instead is the contract, the conduct prohibitions in the ASIC Act and any code the lender has signed, and the contrast between the two regimes is set out in our glossary entry on responsible lending.
Yes, where the lender is an AFCA member and the complaint is eligible. AFCA does not apply the consumer responsible lending test to a business loan, but its January 2024 Approach to Lending to Small Business says it looks at the laws and codes that applied to that lender when it made the lending decision. Even where a lender had signed no code, AFCA has found conduct unconscionable. The detail is in the section on AFCA eligibility and limits.
Not automatically. For a borrower who is an individual, ASIC's test looks at what the new credit is predominantly for, meaning more than 50 per cent. Paying out a home loan or other personal debt is a personal purpose, so a facility that mostly does that can fall on the consumer credit side of the test, whatever the application calls it. A loan to a company is outside the consumer credit legislation. The section on whether a business loan is covered by consumer credit law sets out the test.
Often, if the lender is an AFCA member: the service is free, the lender must cooperate, decisions bind the lender, and while a complaint is open it generally cannot pursue recovery of the debt or list a default. It is worth nothing if the lender is not a member. In 2024 to 25 AFCA closed 21 per cent of small business finance complaints as outside its rules, many because the lender was not a member. Check membership first, then see what to do first above.
Not under the statutory hardship process, which belongs to consumer credit law. A non-bank bound by the AFIA Code may consider reasonable changes but is not required to, and with any other lender you should ask for its financial difficulty process in writing. The detail is in the section on hardship on a business loan above.
A bank bound by the Banking Code must give a small business at least 30 days' notice of a missed payment before demanding full repayment or starting enforcement, and cannot go ahead if the overdue amount is paid inside that period, unless an exception such as insolvency applies. An overdraft or other on demand facility may be called with no notice. The full list is in the section on notice before a lender calls in a loan.
For most complaints, within two years of the lender's internal dispute resolution response, or within six years of when you first became aware, or should reasonably have become aware, of the loss, whichever comes first. AFCA may extend these in special circumstances. The lender must be an AFCA member for AFCA to consider the complaint at all, which is covered in the section on AFCA eligibility and limits.
At least one party to the contract must employ fewer than 100 people or have had a turnover of less than $10,000,000 in the last income year, and for a financial product or service the upfront price payable under the contract must not exceed $5,000,000. Interest is disregarded when working out that upfront price for the cap. It is a test on the price payable under the contract rather than on the size of the loan. See our overview of business loans for how these contracts are usually structured.
Yes, if three things are true at once: the business is a small business on AFCA's test, the credit facility is within AFCA's jurisdictional limit, and the lender is an AFCA member. Membership is compulsory for licensed providers and voluntary for everybody else, so a lender that writes only commercial loans may not be a member at all. Check the AFCA member search before you sign rather than after, and read our glossary entry on the non-bank lender if you are not sure what kind of lender you are dealing with.
The main risks are structural rather than dramatic: a facility taken for a short cashflow gap can become permanent, and because the loan is for a business purpose there is no statutory suitability test standing between the offer and the signature. Read what each facility shape actually does before you choose one in our guide to working capital loans.
For business borrowers the two that matter most are the unfair contract terms reforms and the industry code transition. Unfair contract term protections have applied to small business financial products and services since 12 November 2016, and from 9 November 2023 reforms made unfair terms illegal and penalty bearing, with each unfair term a separate contravention. Separately, a single AFIA Finance Industry Code of Practice published on 16 September 2025 takes effect on 1 October 2026. Our working capital loans guide covers how these sit around an ordinary business facility.
For complaints lodged on or after 1 January 2024, AFCA can award up to $631,500 in most claims of direct financial loss, $1,263,500 on a small business loan where the credit facility is less than $6.3 million, $2,526,500 on a primary producer loan, and $6,300 each for indirect financial loss and non-financial loss. The cap is unlimited where a guarantor has offered their home as security. Interest and limited costs may be added to these caps, and the detail sits in AFCA eligibility and limits above. See what a working capital loan really costs.
It applies where the credit is predominantly for personal, domestic or household purposes, and ASIC's guidance is that predominantly means more than a 50 per cent consumer component. ASIC also states that loans to companies are not subject to the credit legislation, and that only loans to natural persons and strata corporations are caught. A loan drawn for stock, equipment, premises or working capital is therefore outside it, which is the whole subject of the section on consumer credit law and business loans above.
Conduct is regulated by ASIC under the ASIC Act, including the prohibitions on misleading and unconscionable conduct and the unfair contract terms regime. A lender that provides only commercial loans is not required to hold a credit licence and is not legally required to be an AFCA member, so there is no licence to condition and no dispute scheme unless it joined one voluntarily. Our guide to private mortgage lenders covers how this plays out at the private end of the market.
Where the lender is an AFCA member, the compensation cap is unlimited on a claim by a guarantor to set aside a guarantee supported by security over the guarantor's home. The Code's pre signing meeting does not apply to a director guarantor, and a director can choose to sign before the usual third day, so most business owners guaranteeing their own company's loan get neither of those two steps. Our glossary entry on the director's guarantee explains what the document itself does.
Largely, yes, while the complaint is open. AFCA states that during the complaint process the financial firm must not begin legal proceedings about the complaint, must not pursue debt recovery proceedings started earlier beyond the minimum needed to preserve its legal rights, and must not recover the debt, protect the assets securing it, assign the right to recover it, or list a default on a credit file. What a lender can reach if it does enforce is set out in our guide to unsecured business loans and what lenders can take.
FBAA Accredited
