What Is Islamic Business Finance and How Does It Work in Australia?
Business Loans
Guide · Business loans
What Islamic business finance is available in Australia, how the main structures work, what property or equity you may need, how to compare the real cost, and what has to happen before and after settlement.
Quick Answer
Islamic business finance funds a business without charging interest on money lent. Depending on the structure, the financier earns an agreed profit on a sale, rent on an asset, or a share of partnership profit. In Australia, businesses can find Islamic finance for commercial property, equipment, some acquisitions and other business needs. Through Switchboard, the available option is narrower: a 1 to 24 month facility secured by Australian property for an eligible company, partnership or trust with a genuine business purpose. It is not a home loan or direct equipment facility.
Also called: Sharia-compliant business finance, Islamic business loan, halal business loan or Islamic commercial finance. Providers use 'Sharia-compliant' and 'halal' loosely, and neither word on its own means a product has been certified.
What is Islamic business finance, and how is it different from a business loan?
Islamic business finance is finance for a business that replaces interest with a return tied to a real asset. Moneysmart describes Islamic finance as financial services and products designed to follow common ethical and moral principles of Islam, one of which is to avoid products that pay or receive interest, and it says all providers of Islamic finance products in Australia must comply with Australian law.
Interest is called riba, and each structure is built to avoid it. What takes its place is one of three returns:
- An agreed profit on a sale. The financier buys the asset and sells it to you at a price that includes a profit both sides agree up front.
- Rent on a lease. The financier owns the asset and you pay rent to use it for an agreed period.
- A share of profit in a partnership. You and the financier both put in capital and share the profit and the loss.
You do not have to be Muslim to use Islamic financial services and products, Moneysmart says. A conventional business loan charges interest on money lent; an Islamic facility earns its return from the asset instead. The lender still assesses the deal the way it would any business finance, so how business loans are assessed in Australia still applies.
On our panel, Islamic business finance means one thing: a property-secured facility for a business purpose, set out in how the non-bank facility works.
What are murabaha, ijarah and musharakah?
They are three ways of earning a return without interest: murabaha is a sale at an agreed profit, ijarah is a lease, and musharakah is a partnership. The Board of Taxation, which reviewed how Australian tax law treats Islamic finance, defines each of them, and the table sets out those definitions alongside three related structures.
Murabaha (the Board spells it murabahah) is a sale and purchase where the cost and profit margin are made known and agreed by all parties. Ijarah is a lease: the owner leases an asset to its client at an agreed rental fee for a pre-determined period. An ijarah that ends in ownership adds a promise to transfer the asset at the end of the lease by a separate sale or gift. Musharakah is a partnership in which each party contributes capital and shares in the profit and the loss. These are definitions, not a ruling on which structure is permissible; that question belongs to a scholar.
| Structure | How it works | Who owns the asset during the term | How the financier earns | Typical business use |
|---|---|---|---|---|
| Murabaha, or murabahah (cost plus profit sale) | The financier buys the asset and sells it to you at cost plus a profit margin that both sides know and agree | The financier until it sells to you, then you | The agreed profit margin on the sale | Buying stock, equipment or premises |
| Ijarah (lease) | The financier leases the asset to you at an agreed rental fee for a pre-determined period | The financier | Rent | Using premises or equipment without buying it |
| Ijarah muntahiah bi tamlik (lease ending in ownership) | A lease as above, plus a promise to transfer ownership at the end by a separate sale or gift | The financier, until the transfer at the end | Rent, and any price on the final sale | Acquiring an asset over the lease period |
| Musharakah (partnership) | Each party contributes capital and shares in the profit and the loss | Both parties, in their agreed shares | A share of the profit | Joint ventures and project finance |
| Diminishing musharakah (musharakah mutanaqisah) | One party gradually buys the other's share until title transfers | Shared, with the buying party's share growing | The payments for each portion of its share, as the contract sets them | Acquiring property over time |
| Mudarabah | One party provides the capital and the other manages the project | The capital provider's funds, managed by the other party | A share of the project's profit | Investment in a managed venture |
Sources: Board of Taxation, Review of the taxation treatment of Islamic finance, Discussion Paper (October 2010, pp 8 to 9) and final report (released 3 May 2016, p 12). Read 2 October 2026. The business-use column is general, not part of the Board's definitions.
In conventional terms ijarah sits closest to a finance lease, and our comparison of chattel mortgage, lease and hire purchase shows how conventional leases work. The similarity is in the shape of the payments, not the religious basis.
What types of Islamic business finance are available in Australia?
Australian businesses can find Islamic finance for commercial property, equipment and vehicles, some business acquisitions and developments, SMSF commercial property, and some property-secured working-capital or equity-release needs. The market is not one product: structure, minimum deal size, term, security and Sharia oversight vary materially between providers.
| Business need | Common structure or market route | What to check first | Switchboard panel fit |
|---|---|---|---|
| Buy or refinance commercial property | Ijarah or lease-to-own commercial finance, the most common structure in published offerings | Minimum deal size, maximum LVR, term, property type and Sharia oversight | Yes, if the short-term property-secured facility and exit fit |
| Buy equipment, machinery or vehicles | Murabaha or ijarah through specialist providers; one major bank also funds equipment | Deposit or contribution, asset age/type, term, total profit or rent and ownership path | No direct asset finance |
| Acquire a business | Available at the larger end of the market and through specialist structures | Minimum facility, security, acquisition structure and source of repayment | Not the panel product's core use |
| Property development | Specialist Islamic commercial/development finance exists | Site, approvals, presales or exit, leverage and Sharia structure | Deal-specific; do not assume fit |
| Release equity or refinance for a business purpose | Property-secured commercial finance or short-term non-bank finance | Accepted property value, mortgage position, genuine business purpose and exit | Yes, this is one of the panel facility's published uses |
| SMSF commercial property | Specialist providers offer Sharia-structured SMSF commercial property finance | SMSF and limited-recourse rules, trust structure, property type and licensed advice | No |
| Unsecured working capital | Much narrower Islamic market than property or asset finance | Whether the provider needs property or another asset behind the facility | No unsecured facility |
Sources: Moneysmart, Islamic finance in Australia (last updated 18 June 2026); NAB, Islamic banking and finance; HalalWallet, Islamic Business Financing in Australia (independent comparison site, last reviewed March 2026). All read 2 October 2026. Product availability and terms change. Switchboard does not arrange every product in this table.
Which Islamic finance structure fits what I am buying?
Start with the asset and the business objective, not the Arabic label. Property commonly points to an ijarah or lease-to-own structure; equipment and vehicles commonly point to murabaha or ijarah; a partnership or project may use musharakah; and a short-term refinance or equity-release need may use a property-secured facility. Then check whether the actual contract, ownership path and Sharia approval match what you require.
How does the short-term property-secured facility work?
The facility on our panel is short-term, 1 to 24 months as the lender publishes it (October 2026), secured by Australian property, for a business purpose. It is a non-bank lender product, not a bank one, and it is assessed the way private lending is. Long-term Islamic commercial finance comes from specialist providers, and Switchboard does not arrange it.
| Term | As the lender publishes it |
|---|---|
| Structure | Based on ijarah principles, as the lender describes it |
| Sharia approval | None held from any governing authority, the lender states |
| Who can borrow | Companies, partnerships, and trusts with a company trustee |
| Purpose | Buying premises, refinancing, or releasing equity, for a genuine business purpose |
| Security | Australian property, first or second mortgage |
| Facility size | $250,000 to $6 million |
| Maximum LVR | 75 per cent |
| Term | 1 to 24 months |
| Rent | Paid as it falls due, or capitalised into the facility |
| Fees | No application fee; no early repayment penalty |
| Credit score and income | No minimum set; the security, the purpose and the exit are still assessed |
Source: the panel lender's published Sharia facility terms (page modified 10 July 2026, read 2 October 2026). The lender is not named. Terms change; this is not an offer.
The lender describes the facility as based on ijarah principles. In practice it runs like this:
- State the purpose. The business sets out what the money is for: buying premises, refinancing an existing facility, or releasing equity for a business purpose.
- Value the property. The lender has the Australian property offered as security valued.
- Document the facility. The facility is documented on ijarah principles as the lender describes them, with rent paid as it falls due or capitalised into the facility.
- Register the security. A first mortgage or a second mortgage is registered over the property.
- Plan the exit. How the facility will be paid out, by refinance or sale, is set from day one.
Two points matter before you rely on it. First, the lender states that no approval is held from any governing authority, so the Sharia basis is the lender's own description; how to check a Sharia claim covers what that means for you. Second, the lender does not set a minimum credit score or income test, but it still reads the security, the purpose and the exit.
A company buys a small warehouse it will trade from. It uses an ijarah-based facility for 18 months while it arranges long-term finance, Islamic or conventional. The lender reads the valuation, the business purpose and the exit at the start, and the refinance application has to be under way by month 12. If your first commercial property is the goal, see using private lending for a first commercial property.
Illustrative only. No rate or approval is implied.
How do you check that a product is actually Sharia compliant?
Ask who approved the product, against what standard, whether the approval is current, and whether it covers the exact contract you are signing; then read the lender's own disclosure. Moneysmart's advice is direct: if there are claims being made such as 'shariah compliant' or 'ethically approved', look for evidence to support those claims.
- Who approved this product, and are they named?
- Against which standard was it approved?
- Is the approval current, and when was it last reviewed?
- Does it cover this contract, or only the product in general?
- What does the lender's own disclosure say about approval?
Your own checks matter more on a business facility. ASIC says the law provides the lowest level of protection to commercial loans, including loans to small businesses, and the protections that do apply to a business loan are narrower than on a home loan.
What is a Sharia supervisory board, and what should its approval cover?
A Sharia supervisory board is a panel of scholars that a provider appoints to review its products against Islamic principles and give a written opinion on them. Its approval is only as useful as its scope: it should name the product, the contract documents reviewed and the date, and say whether the product is reviewed again after launch. A general statement that a provider is 'Sharia compliant' is not the same thing.
On the panel facility in this guide, the lender states that no approval is held from any governing authority. If you need a board's approval, ask before you apply, not after. Either way, have your own scholar or Islamic finance adviser review the documents before you sign; what to ask before you sign lists what to give them.
What other Sharia points should you check before signing?
Check more than the product label. Ask what happens to any late-payment charge, whether the financier keeps it or directs it elsewhere; what insurance the contract requires and whether takaful is accepted; which party owns the asset and bears the relevant ownership risk during the term; and whether the provider restricts finance for activities such as alcohol, gambling or other industries the provider treats as prohibited.
These details vary by structure and provider. A general statement that a facility is Sharia compliant does not answer how late payments, insurance, ownership risk or prohibited business activities are dealt with in the contract you will actually sign.
Sources: Moneysmart, Islamic finance in Australia (last updated 18 June 2026); ASIC, Disputes about commercial loans, INFO 207 (last updated 19 April 2024). Read 2 October 2026.
How is Islamic business finance priced and how do you compare the real cost?
The financier earns a profit or rent instead of interest. That is a difference in structure, not necessarily in cost, so the number to compare is the total cost of the facility.
In Australia it is often the slightly dearer option. ABC reporting in May 2026 found Islamic finance is rarely the cheaper choice here, because profit rates are benchmarked to market interest rates, providers pay for Islamic legal documentation and annual compliance certification, and a smaller market can mean higher funding costs. That reporting covered home finance, so ask any business provider which of those costs it passes on. No Australian provider in a 2026 comparison of Islamic business finance published a rate; every deal was quoted case by case, so get the quote in writing.
Total cost = rent or agreed profit + establishment or facility fees + valuation + legal and documentation costs + broker fees + discharge or exit costs + any extension or late-payment costs.
A quoted profit rate or rental rate on its own is not enough to compare an Islamic facility with a conventional business loan. Ask for the expected total dollars payable over the same term and the net amount your business actually receives at settlement.
| Cost item | Interest-bearing business loan | Ijarah-based facility (as the panel lender describes it) | What to ask |
|---|---|---|---|
| What you pay for the money | Interest on the amount borrowed | Rent under the ijarah structure | What is the total rent over the term? |
| How it is paid | Usually monthly; sometimes capitalised on private loans | Rent paid as it falls due, or capitalised into the facility | Is the rent paid or capitalised, and what does capitalising add to the payout? |
| Application and establishment fees | Varies by lender | No application fee; other fees depend on the deal | Which fees apply, and are any taken out of the advance? |
| Early repayment | Varies; some loans charge a break cost | The lender states there is no penalty for paying early | Is anything still payable for the rest of the term? |
| Late payment | Default interest or fees, set in the contract | Set in the contract | What is charged if a payment is late, and does the lender keep it or give it to charity? |
Sources: the panel lender's published Sharia facility terms and Switchboard broking, October 2026. The lender is not named. Terms change; this is not an offer. ABC News, Why some people pay more for Islamic financing to avoid conventional home loans (17 May 2026); NAB, Business banking Islamic finance (no update date shown). Both read 2 October 2026. HalalWallet, Islamic Business Financing in Australia (independent comparison site, last reviewed March 2026), read 2 October 2026.
Capitalised rent works like capitalised interest on a conventional facility: it is added to the balance and paid out at the end.
What costs can still apply if the deal does not settle or you repay early?
Do not assume that no settlement means no cost. Before instructing a valuation or lawyers, ask which application, valuation, legal, documentation, certification or due-diligence costs are refundable if the facility never settles. Before accepting an early-payout feature, ask whether any minimum profit, minimum rent, remaining scheduled rent, break amount or other contractual sum can still be payable even if there is no separate early-repayment penalty.
The answer is contract-specific. Get the written fee schedule and payout clause, then compare the amount your business receives at settlement with the total amount it could have to pay if the transaction completes, fails or exits early.
Does Islamic business finance cost more than a conventional loan?
Often a little, but it depends on the deal, not the label, and the sources disagree. One major bank says its Islamic business finance changes the structure, not the economics, with comparable pricing; ABC reporting in May 2026 found Islamic finance in Australia is rarely the cheaper option. On this facility the price reflects private lending: the term, the loan-to-value ratio and the risk in the exit. Compare the total cost, fees and rent included, against a conventional private loan on the same security; comparing the total cost of business finance sets out how.
Who can use Islamic business finance, and what is out of scope?
On our panel it is for a company, a partnership or a trust with a company trustee that has Australian property and a business purpose. A sole trader borrowing in their own name does not fit this facility. It is not a home loan, and it does not fund equipment, vehicles or unsecured working capital.
Fits this facility
- A company, a partnership, or a trust with a company trustee
- A genuine business purpose
- Australian property with equity
- A clear way to pay it out within the term
Does not fit here
- Sole traders borrowing in their own name
- Home loans
- Investment property loans to individuals
- Equipment and vehicle finance
- Unsecured working capital
Investment property loans to individuals are out for a legal reason as well as a product one: under s 5(1)(b)(ii) of the National Credit Code, credit to a natural person to purchase, renovate or improve residential property for investment purposes is regulated consumer credit. Our panel has no Sharia-compliant home loan, so Switchboard cannot arrange one. If your business is new but you own property, see a business loan for a new ABN secured by property.
Can you refinance an interest-bearing business loan into this facility?
Yes, if the loan is secured on Australian property and the purpose is business: the facility can refinance an existing facility as a first mortgage, replacing the existing lender. Because the term is 1 to 24 months, it moves you off the interest-bearing loan for now, not for good; the long-term exit decides where you land, as staying Sharia compliant when the facility ends explains. Before you count any saving, check what your existing lender charges to pay out early, such as a break cost on a fixed rate. Timing is a question for your scholar too: one Melbourne borrower told the ABC in May 2026 that a scholar advised him to hold off switching while the higher repayments would strain his family.
Two brothers trade as a partnership and own the workshop they operate from, with a conventional loan over it. They want out of the interest-bearing loan. Before refinancing into the ijarah-based facility, they ask a long-term Islamic finance provider whether it would take the workshop at the end, and they give the facility documents to their scholar. Only then do they start the refinance, so the 24 months is a bridge to somewhere, not a detour back to interest.
Illustrative only. No rate or approval is implied.
Do the banks offer Islamic business finance?
One major bank does, for larger deals. It publishes Islamic business finance from a minimum of $3 million for buying or building commercial property and land, business acquisitions, and equipment or livestock, including for businesses without property to offer as security. It says its product is signed off by advisers who belong to bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). Below $3 million the options narrow to specialist Islamic finance providers and non-bank lenders, which is where the panel facility, from $250,000 to $6 million, sits. Switchboard does not arrange bank Islamic finance.
Is there Sharia-compliant equipment or vehicle finance?
Yes, from specialist Islamic finance providers, but not through our panel, so Switchboard cannot arrange it today. A business that owns property may use the property-secured facility for a business purpose, with the property as the security.
A sole trader asks for a Sharia-compliant home loan and a Sharia-compliant ute. Both are out of scope: the panel has neither product, and the facility does not lend to a sole trader in their own name. It funds a business purpose for companies, partnerships and trusts only, and we say so plainly on the first call.
Illustrative only.
Source: Federal Register of Legislation, National Consumer Credit Protection Act 2009, Schedule 1 (National Credit Code) s 5(1)(b)(ii), compilation in force 1 July 2026; NAB, Business banking Islamic finance (no update date shown); ABC News, Why some people pay more for Islamic financing to avoid conventional home loans (17 May 2026). All read 2 October 2026. General information, not legal advice.
How much equity, what security and what exit plan does the lender need?
The lender needs Australian property with enough equity, a first or second mortgage over it, and an exit that pays the facility out within the term. As the lender publishes it (October 2026), the facility runs from $250,000 to $6 million at up to 75 per cent loan-to-value ratio (LVR) for 1 to 24 months, and it will not take farms, mines, purpose-built factories, airfields or leasehold outside the ACT.
How much deposit or equity do you need?
For this panel facility, a published maximum 75 per cent LVR means the accepted property value generally needs at least 25 per cent equity before fees, costs and any lender adjustments. For example, if the lender accepts a property value of $1 million, 75 per cent LVR is $750,000. That does not mean a purchase only needs $250,000 cash: duty, legal costs, valuation, fees and any gap between the purchase price and the lender's valuation sit outside that simple LVR calculation.
Does the first mortgage lender need to consent to a second mortgage?
Do not assume a second mortgage can be registered or settle cleanly without dealing with the first lender. The answer depends on the existing mortgage documents, the first lender's policy, the title position and the incoming lender's requirements. Some transactions need the first lender's written consent, a deed of priority or another lender-to-lender arrangement that records whose mortgage ranks first and how enforcement proceeds.
Check this before paying for valuation and legal work. If the first lender refuses consent, delays its response or will not agree to the required priority terms, the second-mortgage structure may have to change or the borrower may need to refinance the first mortgage instead. The registration and priority position is a legal question, so have the solicitor acting on the transaction read the existing mortgage and any priority document rather than relying on a generic yes-or-no rule.
| Purpose | Security position | What the lender reads | The exit it needs |
|---|---|---|---|
| Buying business premises | First mortgage over the premises being bought | The valuation, the contract of sale, the business purpose and the equity going in | Long-term finance, Islamic or conventional, in place before the term ends |
| Refinancing an existing facility | First mortgage, replacing the existing lender | The valuation, the existing debt and why it is being refinanced | A refinance to long-term finance, or a sale of the property |
| Releasing equity for a business purpose | First mortgage, or second mortgage behind an existing lender | The valuation, the combined debt on the property and what the funds are for | A refinance or a sale of the property |
Sources: the panel lender's published Sharia facility terms as of October 2026, and Switchboard broking. The lender is not named.
The exit is the part that decides most files, because the term is short and the lender wants to see repayment planned on day one. Moving from short-term property finance to a term loan and how an underwriter scores an exit go into the detail, and what an exit strategy is covers the term itself. For how this sits against other business finance measured in months, see that guide.
If the facility sits behind an existing lender, it is a second mortgage, and the first lender's position decides a lot; how second mortgages work in Australia covers that. Whether the business trades from the property or leases it out also changes how a lender reads it; see passive versus owner-operated commercial property.
What happens if the exit is not ready at expiry?
The options are an extension on the lender's terms, a refinance to another lender, or a sale. None is guaranteed, which is why the plan starts early: on a 24-month term, have the refinance or sale moving before month 18. How to refinance a commercial property loan sets out the steps.
A family trust with a corporate trustee releases equity from a commercial property for stock and working capital, in second position behind an existing first mortgage. The first lender's position and the combined loan-to-value ratio decide whether it works.
Illustrative only. No rate or approval is implied.
| Exit | What must already be true | Main risk |
|---|---|---|
| Long-term Islamic refinance | The next provider accepts the borrower, property, purpose and structure | Assuming a future provider will approve a deal that has not been tested |
| Conventional refinance | The borrower qualifies with the new lender by expiry | It may not meet the borrower's religious requirements |
| Sale of the property | The sale can complete in time and clear the payout | Sale timing or price leaves a shortfall |
| Extension | The existing lender agrees before expiry | Extension is not guaranteed and may add cost |
What happens when a short-term Islamic facility ends?
It has to be repaid by a refinance, a sale or an agreed extension, and it stays Sharia compliant only if the finance you exit into is Sharia compliant too, which has to be lined up before you start. The panel facility runs 1 to 24 months and Switchboard does not arrange long-term Islamic finance, so if the exit is a conventional refinance, you are back on an interest-bearing loan.
There are three ways out, and each needs checking at the start, not at month 20:
- Long-term Islamic commercial finance from a specialist provider. Ask that provider before you sign whether it would take the property, the entity and the amount, and what it needs. Its criteria decide whether this exit is real.
- A sale of the property. The sale pays the facility out, and no further finance is needed.
- A conventional refinance. It works as finance, but whether it fits your requirements is a question for your scholar, asked before you start.
If staying free of interest is the reason you are looking, get the long-term provider's view first, then use the short-term facility to bridge to it. What happens if the exit is not ready covers the fallback options.
What documents are needed and how long can settlement take?
The lender reads the entity, the property and the exit, so the documents follow those three things.
- Entity documents. The company extract, or the trust deed and the trustee company's details.
- Identification. Identification for each director.
- The property. The property details and the title.
- The valuation. The lender's valuation of the property; what a commercial valuer tests explains what it looks at.
- The purpose. A business-purpose declaration.
- The existing debt. Details of any loan already secured on the property.
- The exit. Evidence of how it will be paid out: a refinance application under way, a sale contract, or a buyer.
The property valuation fixes the figure the facility is sized against, so it usually sets the timetable. Want to know whether your property and purpose fit before you gather the rest? See whether your deal fits the facility.
How long does Islamic business finance take to approve and settle?
There is no single Australian settlement time. For a property-secured facility, the timetable depends on the valuation, company or trust documents, legal documentation, mortgage priority, any first-lender consent and any Sharia review you want before signing. An indicative approval is not a settlement date.
Run the workstreams together where possible: confirm the borrower and purpose, order the valuation, collect entity documents, check the existing mortgage position, give the draft documents to your solicitor and scholar, and start the intended exit refinance early. A file that waits until formal documents arrive to discover a consent or Sharia issue can lose more time than the credit assessment itself.
What should you ask before you sign?
Ask for the full contract documents early, give them to your scholar or Islamic finance adviser, and get written answers on how the rent is set, what happens if you pay late, what insurance is required, the total cost, the exit if it runs late, and how the broker is paid.
| Question | Why it matters |
|---|---|
| How is the rent set? | Profit rates are commonly benchmarked to market interest rates, and your scholar may ask how this one is set |
| What happens if a payment is late? | The contract sets the charge; ask whether the lender keeps it or gives it to charity |
| What insurance must be held over the property? | Ask whether takaful, Islamic insurance, is accepted in place of conventional cover |
| What is the total cost, fees and rent included? | It is the figure to compare against a conventional private loan on the same security |
| What happens at expiry if the exit is late? | The extension terms and costs set your downside |
| How is the broker paid? | Ask any broker how they are paid on the facility, and get the answer in writing |
Source: ABC News, Why some people pay more for Islamic financing to avoid conventional home loans (17 May 2026), read 2 October 2026, on how profit rates are set and why certification adds cost.
What should you give your scholar or adviser to review?
Give them the documents you will sign, not a product brochure, because an opinion is only as good as what it covers:
- The facility agreement and the ijarah terms
- The mortgage over the property
- The rent schedule, and whether rent is paid or capitalised
- The late payment, default and early payout clauses
- The insurance the lender requires
- Any guarantee the directors or trustee are asked to sign
- The lender's own statement on Sharia approval
Allow time for that review in your timetable, alongside the valuation, so it does not hold up settlement.
How is Islamic business finance regulated and taxed in Australia?
Islamic business finance must comply with Australian law like any other finance, and because it is for a business purpose, the consumer credit law generally does not apply to it.
Moneysmart says all providers of Islamic finance products in Australia must comply with Australian law. ASIC's information sheet on whether the credit legislation applies says a loan that is not predominantly for personal, domestic or household purposes is not regulated under the National Credit Act, and that loans to companies are not subject to the credit legislation. ASIC also says the law provides the lowest level of protection to commercial loans. For how lenders outside the banks set their own policy, see the non-bank lender policy matrix.
On tax, the Board of Taxation reviewed how Islamic finance is treated. In the 2016-17 Budget the Government announced it would amend the tax laws to give asset-backed financing arrangements consistent tax treatment with arrangements based on interest-bearing loans or investments, with the changes to apply from 1 July 2018. An announcement is not the same as enacted law, so ask your accountant how your own facility is treated today.
Do not assume the labels rent, profit or sale automatically produce the same GST, income-tax or deduction outcome as interest on a conventional loan. The tax treatment depends on the actual documents, the asset, the parties and the structure. Ask the accountant to review the proposed transaction before settlement, and ask the solicitor about state or territory transfer duty, mortgage or lease duty where relevant.
Stamp duty is a tax that state and territory governments charge on certain documents and transactions, including leases and mortgages, hire purchase agreements and transfers of property, and it varies between states and territories. In its final report the Board of Taxation encouraged the states and territories to provide relief from stamp duty so that it does not arise where there is a synthetic disposal or acquisition that would not have occurred had it not been to give effect to a financial arrangement. That is a recommendation, not law. To avoid duty being charged twice, some providers keep the title in the customer's name and record the Islamic arrangement in a separate contract, the ABC reported in May 2026. Because an asset-backed structure can involve a sale or a lease where a plain loan would not, it can attract duty differently; ask your solicitor and accountant, and check with your state revenue office.
Sources: Moneysmart, Islamic finance in Australia (last updated 18 June 2026); ASIC, Does the credit legislation apply? INFO 101 (last updated October 2020) and INFO 207 (last updated 19 April 2024); Board of Taxation, Islamic finance products review (no update date shown) and final report (released 3 May 2016, pp vii to viii); business.gov.au, Stamp duty (last updated 11 July 2024); ABC News, Why some people pay more for Islamic financing to avoid conventional home loans (17 May 2026). All read 2 October 2026. General information, not legal or tax advice.
What gets an application approved, stalled or declined?
On the Switchboard panel facility, the security, the purpose and the exit carry more weight than a published minimum credit score or income test. A clean file has Australian property the lender accepts, a genuine business purpose, enough equity and an exit that is already moving. Files stall or decline when the exit depends on a refinance nobody has started, when a second mortgage is sought without checking the first lender's position, when the property is a type the lender will not take, or when the borrower needs a Sharia board's approval the lender does not hold.
Can a startup or new ABN qualify?
Potentially, because the panel lender publishes no minimum credit score or income test. That does not remove underwriting. The borrower still needs to be an eligible company, partnership or trust with a company trustee, the property must fit, the purpose must be genuinely business-related and the exit must be credible. A new business with strong property security but no realistic way to repay or refinance within 24 months can still fail the exit test.
Can bad credit still fit?
Potentially, because there is no published minimum credit score on the panel facility, but adverse credit is not ignored. The lender can still assess what happened, whether it affects the property or mortgage position, and whether the proposed exit is realistic. Treat "no minimum score" as policy flexibility, not as no credit assessment.
Do residency, personal guarantees and the type of business matter?
They can, and the rules are provider-specific. Do not assume that one Islamic financier's policy applies to another. Ask whether the provider accepts the borrower's residency status, whether directors, partners or a corporate trustee must give personal guarantees, and whether the provider excludes particular business activities or property uses on Sharia or credit-policy grounds.
Some Australian Islamic finance providers publicly restrict finance connected with activities such as alcohol, gambling or weapons; one major bank's published business page, for example, prohibits financing for alcohol, gaming, arms and weaponry. The panel facility described in this guide should be checked against the lender's current policy on the actual business and security before an application is treated as eligible.
If the aim is to unlock equity for the business, how equity release and refinancing work covers the conventional route, and finance for your business covers the wider options.
From our broking, indicative
What the panel facility looks like on the files we work on, from the lender's published Sharia facility terms (page modified 10 July 2026, read 2 October 2026) and our broking on property-secured, business-purpose files. As of October 2026.
- Facility size $250,000 to $6 million, up to 75 per cent LVR, 1 to 24 months, first or second mortgage, as the lender publishes it.
- Rent paid or capitalised; purchase, refinance or equity release for a business purpose; no application fee; no early repayment penalty.
- Property the lender will not take: farms, mines, purpose-built factories, airfields, and leasehold outside the ACT.
- Who it lends to: companies and partnerships, and trusts with a company trustee, for a genuine business purpose.
- The lender does not set a minimum credit score or income test. It still reads the security, the purpose and the exit.
- Where files stall, in our experience: an exit that depends on a refinance nobody has started; a second mortgage where the first lender's position has not been checked; and a borrower who needs a Sharia board's approval and finds out late that the lender holds none.
Indicative only, based on the lender's published terms and deals we have worked on, not a quote, an offer or a prediction of approval. Terms move with lender appetite and are re-dated at each review. The ijarah structure is the lender's own description, and the lender states no approval is held from any governing authority. Not financial advice.
Islamic business finance replaces interest on money lent with structures such as an agreed profit on a sale, rent on an asset, or a share of partnership profit, and in Australia it must comply with Australian law like other finance. On our panel it means one short-term, property-secured facility for a business purpose, which the lender describes as ijarah-based and for which it holds no approval from any governing authority. Check the Sharia claim yourself, give the documents to your scholar, compare the total cost, and line up an exit that meets your requirements before you start.
Key takeaway: Islamic business finance changes the financing structure, but the commercial questions still matter. Check the product type, total cost, security and mortgage priority, borrower and industry eligibility, Sharia evidence, tax and duty treatment, and the exit before you sign.Frequently asked questions
Islamic business finance funds a business without charging interest on money lent. Depending on the structure, the financier earns an agreed profit on a sale, rent on an asset, or a share of partnership profit. In Australia the provider and transaction must still comply with Australian law.
Australian businesses can find Islamic finance for commercial property, equipment and vehicles, some business acquisitions and developments, SMSF commercial property, and some property-secured working-capital or equity-release needs. The available structure, minimum deal size, term, security and Sharia oversight vary by provider.
It depends on the product. For the Switchboard panel facility, the lender publishes a maximum 75% LVR, so the accepted property value generally needs at least 25% equity before fees, costs and any lender adjustments. A 75% maximum is not a promise that every deal will qualify at 75%.
Yes, from specialist Islamic providers using structures such as murabaha or ijarah, often with a member or customer contribution of around 20 per cent; one major bank also funds equipment, but only from $3 million. The Switchboard panel facility does not directly finance vehicles or equipment; it is secured by Australian property for a business purpose.
Potentially through the Switchboard panel facility if the borrower is an eligible company, partnership or trust with a company trustee, the lender accepts the property security, the purpose is genuinely business-related and the exit is credible. The lender publishes no minimum credit score or income test, but that does not mean approval is automatic.
Not through the Switchboard panel facility when borrowing in the sole trader's own name. That facility lends to companies, partnerships and trusts with a company trustee. Other Islamic finance providers may have different eligibility rules.
Yes, if the new Islamic facility can refinance the existing debt and the borrower, purpose and security fit the provider's rules. The Switchboard panel facility can refinance a business-purpose loan secured on Australian property, but it runs for 1 to 24 months, so the long-term exit should be planned before settlement.
There is no single Australian settlement time. For a property-secured facility the timetable depends on valuation, entity and trust documents, legal documentation, mortgage priority, any first-lender consent and any Sharia review the borrower wants before signing. Start those workstreams early rather than relying on an indicative approval date.
Do not assume a second mortgage can be registered without the first lender's consent. The answer depends on the existing mortgage documents, the first lender's policy and the proposed second mortgage. Check the first lender's position and get legal advice before relying on a second-mortgage exit or settlement.
Ask who approved the exact product and contract, which standard they used, when the approval was last reviewed and whether there is written certification or continuing Sharia supervision. A provider describing a product as Sharia compliant is not the same evidence as a current written approval covering the documents you will sign.
The facility must be repaid, refinanced, extended if the lender agrees, or paid out from a sale. For a 1 to 24 month facility, the safest approach is to line up the intended refinance or sale well before expiry and understand extension costs and fallback options before signing.
Yes, if the deal is large enough. One major bank publishes Islamic business finance from a minimum of $3 million. Below that, the options are specialist Islamic finance providers and non-bank lenders, including the short-term, property-secured facility on our panel. See do the banks offer Islamic business finance.
No. Our panel has no Sharia-compliant home loan, so we cannot arrange one; specialist Islamic home finance providers offer them. The panel facility is for a business purpose only. See what our panel covers.
No. They are different in legal and Sharia structure, although the dollar cost can look similar. Compare total dollars payable, including rent or profit, establishment and facility fees, valuation, legal costs, broker fees, discharge costs and any extension or late-payment charges.
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