Already have a loan or two? How existing debts shape your next approval

How do existing debts affect a new application?

business.gov.au lists debts alongside income, expenses and cash flow as things lenders assess. For unsecured lending, the maths is simple: the business can only carry so much in repayments from its turnover. Every existing commitment takes a share of that. Whatever’s left is the room for a new facility.

That’s why two businesses with the same turnover can get very different answers. The one with no other lenders has all its capacity available. The one already paying three weekly debits may have almost none.

What counts as an existing debt?

Type	How it shows up
Unsecured business loans	Weekly or fortnightly debits
Merchant cash advances	Daily or weekly deductions, often from card settlements
Lines of credit and overdrafts	Interest and repayments; the drawn balance
Equipment finance and leases	Monthly debits
ATO payment plans	Regular payments to the ATO
Business credit cards	Card repayments
Guarantors’ personal debts	On their credit files and, sometimes, personal statements

Lenders also look for facilities that aren’t obvious, such as buy now pay later accounts for business purchases or supplier finance arrangements.

What is stacking, and why do lenders dislike it?

Stacking is when a business takes out several short-term facilities, often from different lenders, within a short period. It commonly looks like this: a first advance, then a second before the first is repaid, then a third to cover the repayments on the first two.

Lenders dislike it because:

• multiple daily or weekly debits leave very little cash buffer;
• each new facility often exists to service the others, not to grow the business;
• if one lender takes a general security interest, others may be ranked behind it;
• the pattern suggests a cash-flow problem that more borrowing won’t fix.

Many lenders will decline a file with several active short-term advances, regardless of turnover. If you’re in that position, the next move is usually not another advance.

When does consolidation help?

Consolidating means paying out several facilities with one new one. It helps when:

1. the new facility has lower total weekly repayments, giving the business breathing room;
2. the term fits what’s being funded;
3. there’s a plan to avoid re-stacking, such as a line of credit for future gaps instead of new advances;
4. the total cost of the new facility, including fees, makes sense compared with running the old ones off.

It doesn’t help when it just resets the clock on the same problem. We’d model both paths before suggesting it. If you’re weighing this up, send us the details and a specialist will look at the numbers with you.

For owners who have property, consolidating several unsecured facilities into one secured loan is sometimes an option. Our page on outgrowing unsecured covers the trade-offs.

What should you do before applying for another facility?

• List every facility: lender, balance, repayment, frequency and end date.
• Work out total weekly repayments as a share of weekly deposits. If it’s already high, a new facility may not help.
• Consider paying one down if it’s close to finishing. A facility that’s nearly repaid is often better finished than refinanced.
• Separate the need. If you need equipment, put it on equipment finance. If customers owe you, look at invoice finance.

If you’re not sure how your commitments look to a lender, the borrowing estimator lets you enter existing monthly repayments and shows how they reduce the indicative range.

Does paying off debts early help your credit file?

It can help your standing with lenders by reducing commitments. The OAIC notes that repayment history stays on a credit report for two years and credit enquiries for five, so a run of on-time repayments and fewer new applications both help over time.

If debts are genuinely unmanageable, business.gov.au has guidance on managing business debt, and your accountant is an important first call.

A worked example (illustrative)

A food truck operator has two merchant cash advances running, taking a share of card takings each day, plus a small equipment lease. Card takings average about $36,000 a month. The owner wants a third advance to cover a slow winter.

Most lenders would decline a third advance. A better path might be to finish the advance closest to completion, then consolidate what remains into a single facility with repayments matched to the seasonal pattern, and keep a small line of credit for future winters. The example is illustrative; the pattern is common.

What does a healthy debt picture look like?

There’s no universal number, but healthy files tend to share some features: one or two facilities, each matched to a clear purpose; repayments that leave a visible buffer after wages and rent; no facility taken out to service another; and an ATO position that’s lodged and under control. If your current setup doesn’t look like that, the path back usually involves finishing one facility before starting another, rather than adding a new one on top.

Talk to someone who’ll read the whole picture

If you already have facilities running, an honest review is worth more than another quick advance. Your credit file isn’t touched when you enquire, we don’t push your details out to a group of lenders, and a real person looks at everything you’re carrying before recommending anything.

Please list every existing facility on the form accurately, even ones you’d rather not mention. It’s how we get the recommendation right first time. Start your enquiry.