Your online store is doing what you hoped it would. Orders are climbing, but so is the gap between what customers want and what you can deliver, because the next step costs money you do not have sitting in the bank. The gap might be a bigger inventory order before the peak season, a warehouse fit-out, packaging equipment, or the invoices your B2B customers keep paying late. However it shows up, you now have to decide how to fund it. That decision, more than the growth itself, is what will shape the business over the next few years.
The real question is not whether to borrow. It is which funding option fits the way your business earns, what you are prepared to put at risk, and what your stage of growth will actually support. The main options are bank debt in the form of term loans, overdrafts and business credit cards; revenue-based products such as business cash advances; invoice finance; asset finance; grants; and equity through crowd-sourced funding or private investors. Self-funding from your own revenue is the baseline you should measure every option against.
Some options look more distinct than they are. A business cash advance and invoice finance both turn future cash flow into money today, but they suit different revenue models and carry very different cost structures. Asset refinancing is simply a loan secured against equipment you already own. A merchant cash advance is often structured as a sale of future revenue rather than a loan, which matters for the protections that apply. And grants are not something you can plan a budget around: they are competitive, tied to eligibility criteria, and rounds close without notice.
Five factors to weigh before you choose
How your business gets paid
Funding products are built around the way money enters your business, and the fit between the two decides how smoothly the arrangement works in practice.
- Card-based retail sales: if most of your revenue is online card payments, a business cash advance fits naturally, because the provider takes an agreed percentage of each day's settlements. Repayments rise and fall with your sales, which suits a seasonal business.
- B2B sales on 30 or 60 day terms: if your cash is sitting in unpaid invoices, invoice finance unlocks it. Factoring sells the invoices to the financier, who collects from your customers. Invoice discounting borrows against the invoices while you keep collecting from customers yourself. An online business selling direct to consumers has no invoices to finance, so this option is not available to it at all.
- Subscription or recurring revenue: predictable monthly revenue is the easiest cash flow to borrow against on ordinary terms, because the lender can see the money coming in.
- Seasonal or lumpy revenue: a repayment structure tied to sales, or a facility you can draw down and repay quickly, will beat a fixed monthly repayment that keeps falling due through the quiet months.
What you are willing to put at risk
Every option except a grant and true self-funding puts something at risk, and the security is often personal as well as business.
Term loans, overdrafts and asset finance are usually secured. The lender registers a security interest over business assets on the Personal Property Securities Register (PPSR), the national noticeboard that records security interests over personal property such as stock, equipment, vehicles and accounts. If the business defaults, the lender can take and sell that property. With invoice finance, the interest is over your receivables. With a chattel mortgage or hire purchase, it is over the equipment itself. Check what the security actually covers: only the asset being financed, or the whole business including assets you acquire later.
Directors are routinely asked for personal guarantees, which puts the family home and personal savings behind the business debt. A guarantee is a separate contract with its own terms, and it is one of the most common ways a funding decision that fails becomes a personal loss. Unsecured options exist but are narrower. A cash advance is usually not secured against a particular asset, because the provider takes its repayment from future sales instead. Equity is not secured either, but investors take an ownership stake and a say in how the business runs.
- Cash advance: your ownership stays intact and repayments track sales, but the effective cost is high and the documents may still include a personal guarantee.
- Equity: no interest bill and no fixed repayments, but you permanently give away part of the upside and some control, and the raise itself must comply with fundraising laws.
A quick PPSR search will show what is already registered against your business, which is worth doing before you sign anything so you know what a new lender will rank against.
The real cost of the money
A bank term loan quotes an interest rate, usually with establishment and ongoing fees on top. Cash advances and invoice finance quote differently, in factor rates, discount rates and flat fees. These different languages make the effective annual cost genuinely hard to compare, so ask for the total dollar cost over the life of the facility and the equivalent annual percentage rate before you choose.
Revenue-based advances carry a fee built into the repayment amount. Because the money is typically repaid quickly and the fee does not move with the term, the effective cost can be far higher than the quoted figure suggests, and it is easy to underestimate. Get the total cost in writing. Invoice finance charges a discount rate on the value of the invoices, so the cost depends on how long your customers take to pay: the slower they pay, the more the facility costs.
Equity has no interest bill, but it is the most expensive money in the long run if the business succeeds, because investors share the upside forever. That trade is worth making when the investor brings expertise, credibility or access you could not buy otherwise, not just cash. A grant is the only option with no repayment and no ownership given away, but it has a cost in time: applications are detailed, competition is real, and the outcome is never guaranteed.
Where your business is at
Lenders underwrite against track records. A young online business with a year of statements and no history of profit will struggle to get a conventional term loan, and any loan that is offered will come with a personal guarantee attached. Established businesses with clean financials can access cheaper, longer-term bank debt.
Alternative providers underwrite against what you are actually selling. Cash advance and invoice finance providers assess your daily settlements or outstanding invoices rather than your balance sheet, which is why they can move quickly. That speed has a price, but it exists for a reason: a business with a confirmed order book and no bank appetite is exactly who these products are designed for.
For companies, crowd-sourced funding (CSF) is a regulated way to raise up to $5 million in any 12-month period by offering ordinary shares to the public. It is open to unlisted public companies and eligible proprietary companies with less than $25 million in gross assets and annual turnover. The raise runs through an intermediary that must hold an Australian financial services licence authorising CSF services, retail investors are capped at $10,000 per company per year, and investors get a five-day cooling-off period. ASIC's crowd-sourced funding guidance sets out the offer document requirements in detail.
Grants are typically targeted at particular stages, industries or activities. Export promotion grants support small and medium exporters with overseas marketing costs, for example, but the rounds open and close: Austrade's Export Market Development Grants program has no round open at the moment. The business.gov.au grants and programs finder is the central directory covering federal, state and local programs, and it is worth checking regularly because new programs launch and old ones disappear.
What protections apply, and what does not
The most important legal point is the one most owners do not expect: business finance sits outside the consumer credit protections. The National Credit Code, in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth), applies only where credit is provided wholly or predominantly for personal, domestic or household purposes (s 5). The responsible lending obligations, hardship provisions and disclosure rules that protect consumer borrowers generally do not apply to the loans and advances your business takes. That is not a reason to avoid the products, but it is a reason to read the documents yourself, because the statutory safety net is not there.
What does protect you is the unfair contract terms regime. Since 9 November 2023, proposing, using or relying on an unfair term in a standard form contract with a small business is prohibited and can attract penalties, as the ACCC explains. The test asks whether the term causes a significant imbalance in the parties' rights, whether it is reasonably necessary to protect the legitimate interests of the party relying on it, and whether it would cause detriment if relied on. A term that is unfair is void. Standard form finance contracts are covered: ASIC regulates unfair terms in contracts for financial products such as loans, and the ACCC covers the rest. In practice, a take-it-or-leave-it finance agreement with one-sided terms, such as a unilateral right to vary fees or an aggressive default clause, may contain terms that cannot be enforced against you.
If you raise equity through CSF, the compliance obligations are real: eligibility caps, a compliant offer document, investor caps and cooling-off periods. A lawyer's job is to make sure the offer complies before it goes live, not to defend it afterwards.
Getting an Artificer Legal lawyer to check the deal before you sign
The pattern across all of these products is the same: easy to sign, hard to exit. Before you commit, an Artificer Legal lawyer can help you in a few specific ways.
- Translate the documents: review the loan, factoring, hire purchase or CSF offer documents and explain what the fees, security, covenants and events of default actually mean for your business.
- Stress-test the downside: work through what happens if sales drop, a major customer does not pay, or the lender demands repayment early, and check whether personal guarantees and cross-guarantees reach beyond the business.
- Check the register: run a PPSR search on your business and on the equipment or invoices being financed, so you know what is already secured and what priority the new lender will claim.
- Test the terms: identify clauses that may be unfair and unenforceable under the unfair contract terms regime and negotiate them out before signing, rather than litigating them afterwards.
- Structure equity properly: for a CSF raise or private investors, prepare the constitution, offer document and shareholder arrangements so the raise complies with the Corporations Act 2001 (Cth).
Having the documents reviewed before you sign is far cheaper than unpicking them after a default, and it changes what you negotiate: you compare offers on total cost and on what happens when things go wrong, not just on the rate.
Choose the funding that survives a slow month
The decision most owners get wrong is not which option has the lowest rate. It is which option keeps working when revenue dips. An online business with seasonal or lumpy sales should match its repayment structure to its cash flow: a repayment that shrinks in a quiet month beats a fixed monthly repayment that keeps falling due regardless. Before you compare rates, answer this question: if sales halved tomorrow, could this funding still be serviced without the directors reaching for personal savings? If the honest answer is no, the option is wrong for your business no matter how cheap it looks.
The options divide cleanly. Bank debt is cheapest for established businesses that can offer security and a guarantee. Cash advances move fast and repay from your sales, at a higher effective cost. Invoice finance unlocks money already owed to you, but only if you sell on terms. Asset finance spreads the cost of equipment over its useful life. Grants are worth applying for and cannot be relied on. Equity funds growth without debt, at the price of ownership and compliance. Match the option to how you get paid, cost it honestly, check what it puts at risk, and have a lawyer read the documents before you sign.