Company director business loans

Running your business through a company gives it a separate legal identity. When the company borrows, the debt belongs to the company, not to you. That’s the theory. In practice, almost every lender to a small private company will ask the directors to personally guarantee the loan, so the line between your money and the company’s is thinner than many directors expect.

Understanding how that works, and what lenders check, makes the process far less surprising.

How lenders assess a company

A company application is really two assessments in one:

The company	Each director
Bank statements, usually 6 to 12 months	Photo ID and director ID
ABN, ACN and registration details	Personal credit file
BAS lodgements and ATO position	Other debts and guarantees
Financial statements for full doc	Property owned, if used as security
Trading history and industry	Experience running the business

A strong company with a director who has a poor credit history can still struggle, and a director with an excellent file can’t fully make up for a company whose account is in trouble. Both sides need to hold up.

The personal guarantee

A guarantee means that if the company can’t repay, the lender can pursue the guarantor personally. For most small company loans it’s standard, and refusing to give one usually means the loan won’t happen. What you can do is understand exactly what you’re signing:

• Is the guarantee limited to this loan, or does it cover all the company’s debts with the lender?
• Is it limited to a fixed amount, or unlimited?
• Is any property being offered as security alongside it?

Get independent legal advice if you’re unsure, especially when property is involved or a non-director family member is being asked to guarantee.

Tax debt and director penalties

Companies carry a particular risk around tax. Under the director penalty regime, directors can become personally liable for certain unpaid company tax amounts, including PAYG withholding and superannuation guarantee. Large business tax debts may also be reported to credit reporting bureaus. Lenders know this, so they look carefully at the company’s ATO position.

If your company has tax debt, it isn’t automatically a barrier. Lenders generally want to see that it’s lodged, that a payment plan is in place and being met, or that the loan will clear it. Our page on ATO debt business loans explains the options.

Trusts and more complex structures

If your business runs through a trust with a corporate trustee, expect to supply the trust deed and any variations, and to show the trustee has the power to borrow. Lenders will want to know who the beneficiaries and appointors are. It adds a step but rarely stops an application.

An illustrative example

A Brisbane signage company, run as a Pty Ltd by two directors, wants $80,000 for a new large-format printer. The company has traded for five years, but its last return is late because of a change of accountant, and it has an ATO payment plan from a slow winter. A low doc lender assesses twelve months of company statements, confirms the payment plan is being met and asks both directors to guarantee. The printer itself forms part of the security. Illustrative only.

Restructured from sole trader?

If you recently moved an existing business into a company, the new company has little history of its own. Many lenders will look through to the old business if it’s clearly the same operation, same customers, same industry and same owner. Explain the change up front and have both sets of records ready. Our guide on sole trader vs company when borrowing goes further.

Keeping company and director finances apart

Lenders find company applications easiest when the company’s account is used only for company business. Directors’ wages, loans to directors and personal spending all show up in the statements, and while they’re normal, a tangle of them makes the account harder to read. If you draw money irregularly, record it clearly as director drawings or a director loan so it can be explained in a sentence. Your accountant can help you treat these consistently, which also matters at tax time.

Before you apply

• Have each director’s ID and director ID ready.
• Download the company’s ATO portal statement.
• Check that ASIC details, including the registered address and officeholders, are current.
• Know what other guarantees each director has already given.

Talk it through with one person

Tell us about the company, its directors and what you need. There’s no credit check to make an enquiry, we don’t share your details around a crowd of lenders, and one real person reviews it and calls you. Be clear about tax and existing guarantees so we approach the right lender first. Start your enquiry here.