Yes, a sole trader can get a business loan in Australia. The difference is in how lenders assess you. Because a sole trader and the business are legally the same person, a lender looks at you personally as well as your trading, and that changes what you need to show.
This guide covers what lenders look for from a sole trader, the documents to prepare, the loan options available, and how to improve your chances.
Can a Sole Trader Get a Business Loan?
Yes. Plenty of lenders lend to sole traders, from banks to online and non bank lenders. What matters is not the business structure on its own, but whether you can show consistent income, a reasonable credit history, and the ability to afford the repayments.
A sole trader is not a separate legal entity. You and the business are one and the same, which means you’re personally responsible for the business’s debts. For a lender, that is partly reassuring, since there’s a clear person to assess and rely on, and partly a constraint, since everything depends on one person’s income and track record.
How Lenders Assess a Sole Trader
Your personal credit file matters most. A sole trader generally doesn’t have a separate company credit file the way a company does, so the lender relies heavily on your personal credit history. Our guide on Credit Score in Australia: What It Means for Your Loan Application explains what lenders see and how to check your own file.
Your income comes from your tax return. The ATO’s rule is that a sole trader declares business income in their individual tax return, with no separate return for the business. You can read the ATO’s explanation on its business income page. Because your business income sits in your personal return, lenders use your tax returns and notices of assessment to judge what the business earns.
Lenders usually focus on profit, not turnover. A sole trader who claims large deductions can end up with a low taxable income, even if the business turns over a lot. Many lenders assess income after deductions, though some add back certain items, so how your income is treated can differ between lenders. This is worth knowing before you apply, because a strong turnover with a low declared profit can limit what you can borrow.
Your ABN and trading history. Lenders check that your ABN is active and how long you’ve held it. An ABN holder business loan usually requires a minimum trading period, often 6 to 12 months for online and non bank lenders and longer for banks. You can confirm your ABN details for free through ABN Lookup.
Your existing debts and commitments. Lenders look at your personal and business debts together, since they are all yours.
A Simple Illustration of Turnover vs Declared Profit
Here is an illustrative example, not a lender’s actual formula. Imagine a sole trader whose business brings in $200,000 in a year. After business expenses and deductions of $140,000, the net business income declared in their tax return is $60,000.
To a lender, the $60,000 is the income figure that matters, because it’s what’s left to cover living costs and loan repayments. The $200,000 turnover shows the business is active, but it doesn’t show what the owner can afford to repay. That is why two sole traders with the same turnover can be offered very different loan amounts, and why it pays to understand this before you apply, not after a lender explains it to you.
Documents a Sole Trader Needs
Having these ready speeds up an application:
- Photo identification
- Your active ABN details
- Personal tax returns, usually the last one to two years, with business income reported
- ATO notices of assessment
- Business bank statements, typically three to six months
- BAS statements if you’re registered for GST
- Details of your assets and liabilities, including any property you could offer as security
- A clear statement of the amount and purpose of the loan
Our Business Loan Requirements guide covers the broader list lenders ask for and what counts as acceptable trading history.
Loan Options for Sole Traders
Unsecured business loans. Often the quickest option, and common for sole traders with a few months of consistent trading. Our Unsecured Business Loans guide covers how they work and why a personal guarantee is usually involved. As a sole trader you’re already personally liable, so the guarantee doesn’t add much risk beyond what you already carry.
Secured business loans. If you own property, such as your home, using the equity as security can unlock a larger amount and a lower rate. Our Secured Business Loans guide explains the trade off, including the real risk of putting your home on the line.
Equipment finance. If you need a vehicle, tools, or machinery, the asset secures the loan, which can make it easier to get. See our Business Equipment Loan guide.
Low doc options. Some lenders will assess you mainly on bank statements and your ABN history rather than full financials, which can suit a sole trader who doesn’t have two years of tax returns ready. These often carry a higher rate.
A personal loan. Some sole traders use a personal loan for business costs, particularly when the business is very new. It’s assessed on you as an individual, and the debt is yours either way.
If You’re a New Sole Trader
If you’ve only just registered your ABN, you’ll find mainstream lenders want a minimum trading period you haven’t reached yet. Our Start Up Business Loan guide covers the options for a business with no trading history, including secured lending against personal assets, equipment finance, and grants.
How to Improve Your Chances
- Keep business and personal money separate. A dedicated business account makes your bank statements easy to read, which helps a lender trust your numbers.
- Check your credit file and fix errors before you apply.
- Lodge your tax returns on time. Missing returns make it difficult to prove your income.
- Understand how your deductions affect your declared profit, and talk to your accountant if you’re planning a borrowing application in the next year.
- Reduce unnecessary credit, such as unused credit card limits, which lenders count against your borrowing capacity.
- Be realistic about the amount you need and can afford to repay from your own income.
If your credit has had problems, our Business Loan Bad Credit guide covers your realistic options and the warning signs of predatory lenders. ASIC’s Moneysmart also has independent guidance on borrowing and understanding what you’re committing to.
Sole Trader or Company: Does It Change Your Loan?
Lenders can lend to either structure, but they assess them differently. A company has its own credit file and its directors usually give personal guarantees, while a sole trader is assessed as one person. Whether to change your structure is a decision for your accountant and legal adviser, based on tax, liability, and growth plans, and it shouldn’t be driven by borrowing alone.
Looking for a Home Loan as a Sole Trader?
Many sole traders also want to borrow for a home, and lenders assess self employed income differently from payslip income. If that’s what you need, our Self Employed Home Loans page covers it.
Should You Use a Broker?
A broker can tell you quickly which lenders accept sole traders with your trading history and how they treat your income, so you’re not applying to lenders that were never going to say yes. Our Business Loan Broker guide explains how brokers are paid and how to choose one. Lodestar Finance’s Business Loans service compares options across a panel for sole traders and other business structures.
FAQs
Frequently Asked Questions
Yes. You don't need company. Lenders assess you personally and your business trading together.
Usually an active ABN, identification, personal tax returns and notices of assessment, business bank statements, and details of your assets and debts.
It varies. Many online and non bank lenders look for around 6 to 12 months of trading, while banks often want longer.
Often the lender asks for one, but as a sole trader you're already personally liable for the business's debts, so a guarantee adds little beyond your existing responsibility.
Not necessarily. Many lenders focus on your profit after deductions rather than turnover, so a high turnover with a low declared profit may not support a larger loan.
