Australian banks are approaching business lending differently this year, and it's worth knowing why. A lot of it comes down to pressure inside the banks themselves, and very little to do with the cash rate.
The next twelve months are a good window for a business loan refinance in Australia. Banks have more reason to compete for your business than they've had in years, and it's worth checking where your pricing actually sits.
Why The Banks Need Business Borrowers More Than Ever Before
Home loan growth at the major banks has cooled this year, and APRA's own banking data shows it. Home lending has carried Australian banking for a generation, and a slower engine doesn't take shareholder expectations down with it.
Every bank has to report to its shareholders and produce a return. When the mortgage arm slows, and the dividend expectation hasn't moved, the money has to come from elsewhere. Business banking has always been one of the ways banks make good money, and it's now being asked to carry more of the load.
We've watched this play out over years in lending, first in business banking and now in broking. When a bank needs volume out the door in a division, three things tend to happen:
1. Retention gets aggressive.
Losing a business client hurts more when the residential book isn't backfilling the volume, and the team responsible for keeping you fights harder than they have in years. Expect faster callbacks, matched offers, and an account manager suddenly a lot more interested in your file.
2. New business gets priced hard.
The quickest way to write volume is to take a deal off a competitor, and price is the blunt instrument for doing it. Sharper rates and fee waivers start turning up simply because the bank needs the numbers.
3. Credit appetite improves.
Nobody meets a profit target by declining everything, and marginal deals that would have been knocked back a year ago start getting a second look.
None of this is the bank being generous. The bank is under pressure to hit a number, and that pressure won't last.
Business Loan Pricing Is Risk Rated, Not A Shelf Price
This is where many business owners get caught out. Residential lending is close to a commodity, and your rate is largely a function of your loan-to-value ratio and your loan size. Two borrowers with similar numbers get similar pricing, which makes it fairly easy to compare.
Business and commercial lending doesn't work that way. Your pricing is risk-rated. The bank builds a view of how risky your business is, then prices you on it, looking at your profitability, balance sheet strength, interest and debt service cover, industry, security quality, tenant profile and lease terms where commercial property investment is involved.
Change the risk, and the price changes with it. It catches people out again and again. When your business improves, and nobody tells your bank, you're still priced on an old version of it, sometimes two or three years out of date.
You're paying for a risk profile that no longer exists, and nobody at the bank is going to notice this for you. Credit teams reassess when they're given a reason to.
Your Latest Tax Returns Are A Pricing Lever
Get your tax returns lodged as soon as you reasonably can. It's the simplest thing on this list, and it costs nothing, because lenders price you on the latest financials they can see.
A strong year that’s not presented to the lender won't help your pricing at all. You're still assessed on prior years, which may have told a very different story.
We've seen businesses carry an uncompetitive margin for an extra six or nine months, purely because of lodgement timing. If you’ve had a strong FY2026, let’s take a look at the numbers.
When To Refinance A Business Loan
Timing matters more than people think, and it comes down to two things: How ready you are, and when you go to the bank.
A few years ago we had a commercial investor, a client of more than a decade, with a portfolio of offices and supermarkets. He had vacancies, which meant the portfolio wasn't really bankable, and his margin reflected that.
He asked us several times to find him something better, and every time we said no. The answer would have been the same everywhere, and we'd have burned goodwill and spent money on valuations finding that out.
We stayed close with his agent, waiting for the vacancies to be filled and got the lease profile right, then moved once he was in the strongest position he'd ever been in.
It took a couple of years. When we finally went, the pricing came back meaningfully lower, on the same buildings, with the same borrower.
Then there's the bank's own calendar. Their financial year resets at the start of October, and that's when targets reset, and appetite is usually at its strongest.
We've deliberately held files back to land in that window and seen them price better for the wait.
Turn up with a strong file, find a lender that's hungry for volume, and pick the right month, and the pricing won't look anything like what you were quoted months earlier.
The Cost Of Trusting Your Bank Too Much
We're brokers, which means you'd expect us to say this, but we want to be fair about it. We work closely with business bankers, and plenty of them are excellent. When a bank's offer is fair, we'll say as much and back it, rather than push a client to move for no reason.
Still, the costliest mistake we watch business owners make is trusting their incumbent lender too much.
A commercial agent once suggested one of his landlords get a health check on her portfolio. She was in her seventies, held a substantial commercial property portfolio, and had banked with the same institution for decades. She liked them, and she'd asked about her rate more than once over the years.
Every time, the answer was the same, “This is as good as we can do.” Nobody had ever tested whether it was true.
Spending half an hour understanding her situation made it clear to me that she was being overcharged. We wrote a credit paper, took it to a couple of other lenders for genuine indicative pricing, then went back to her bank with a case rather than a complaint.
Her rate dropped within a week, and the annual saving ran into six figures. She wanted to leave on principle, but we talked her out of it, because moving would have cost tens of thousands in valuations and thrown away a relationship that had otherwise served her well.
Her loyalty was never the expensive part. Thirty years of nobody checking was.
What To Have Ready Before You Ask
Before you test your business lending in the next twelve months, get these ready:
- Your latest financial statements and tax returns, lodged
- Current management accounts, this quarter's profit and loss and balance sheet
- Your tenancy schedule, if commercial investment property related
- A summary of the loan facilities you have, including interest rates, repayment terms, security structures and loan expiry dates
Then somebody has to actually make the ask. Plenty of business owners find it uncomfortable to press their own banker for a discount, which is entirely understandable, and it's a lot easier when it isn't your own relationship on the line. It's exactly what a broker is for and you need one with commercial experience, someone who knows how to present deals to the bank.
Frequently Asked Questions
Can I negotiate my business loan interest rate?
Yes, and it happens more often than plenty of borrowers assume. Business pricing comes from a risk assessment rather than a fixed rate card, which usually leaves room to move when the numbers support it. Bring current financials and a real competing offer, and that room gets bigger.
Do I have to change banks to get a better rate?
Often not. Showing your bank you have other options is usually enough to move them, and it saves you the valuation costs of switching. Moving is the fallback, not the goal.
How long does a business loan repricing take?
A straightforward repricing backed by current financials can move within a fortnight, while a full refinance to a new lender takes a lot longer.
Get A Second Read On Your Lending
A couple of years without anyone testing your business lending is reason enough for a conversation. A lending health check takes about half an hour, with no application and no obligation. We'd rather tell you quickly that you're fine and let you get on with your day than waste your time.
About the author
Tim Sheehan is Director and Senior Finance Broker at TS Finance Broking in Melbourne. He started as an accountant, spent years in business banking, and has worked in lending for twenty years, settling more than $500 million in loans since becoming a broker in 2013. He specialises in commercial and self employed lending, including complex structures, and works alongside clients' accountants on many files.
Disclaimer
This article contains general information only. It has been prepared without taking into account your objectives, financial situation or needs, and does not constitute financial, credit, tax or legal advice. Client examples have identifying details removed, and outcomes vary according to individual circumstances, lender policy and market conditions at the time. Lender pricing, policy and appetite change without notice. All applications are subject to lending criteria, fees and charges. You should consider whether the information is appropriate for you and seek advice from your accountant or a licensed adviser where relevant.
TS Finance Broking. Credit Representative 436865, authorised under Australian Credit Licence 389087.
