Top 5 Loan Structures and When to Use Them

Not all loans are created equal—and the right structure can make or break your financial strategy. 

This guide breaks down the five most common business loan structures in Australia, their real-world use cases, and how to decide what works best for your business. 

Why Loan Structure Matters 

Business owners often compare loans based on interest rates alone—but in reality, the loan structure can have an even greater impact on your cash flow, tax benefits, asset ownership, and long-term flexibility. 

A well-structured loan: 

• Aligns with your income cycle 

• Matches the useful life of the asset or need 

• Maximises tax efficiency 

• Minimises strain on working capital 

Let’s explore the top 5 structures in the Australian market—and how to choose the right one at the right time. 

1. Chattel Mortgage 

Best for: Purchasing vehicles, machinery, or equipment 

Also known as: Asset purchase loan 

A chattel mortgage is one of the most tax-effective and popular loan types for businesses. Under this structure, you take ownership of the asset upfront, while the lender registers a mortgage over it until the loan is repaid. 

Key Benefits: 

• Immediate asset ownership 

• Full GST claim (if registered) at the time of purchase 

• Interest and depreciation deductions available 

• Option for balloon/residual payment to reduce monthly outgoings 

When to Use It: 

• You’re purchasing a vehicle or equipment that generates income 

• You want asset control from day one 

• You need to preserve working capital but still want tax benefits 

Example: A landscaping business purchasing two new commercial mowers on a 5-year chattel mortgage with seasonal payments. 

2. Line of Credit (LOC) 

Best for: Short-term cash flow flexibility 

Also known as: Revolving credit facility 

An LOC works much like a credit card—except typically with better terms. You’re approved for a fixed limit and can draw down funds when needed. As you repay, the funds become available again. 

Key Benefits: 

• Only pay interest on what you use 

• Continuous access to funding without reapplying 

• Ideal for variable working capital needs 

When to Use It: 

• You have seasonal income or irregular client payments 

• You need a buffer for day-to-day operations 

• You want flexibility without locking in a term loan 

Example: A café uses a $50K LOC to manage supplier bills and wages during slower winter months, then replenishes it during summer. 

3. Unsecured Business Loan 

Best for: Fast funding or smaller loan amounts 

Also known as: Cash flow loan or short-term business loan 

This loan type doesn’t require asset security, making it easier to access—especially for newer businesses or service-based industries. 

Key Benefits: 

• Quick approvals, sometimes within 24–48 hours 

• No asset collateral required 

• Flexible terms ranging from 3–36 months 

• Based on turnover, not profits 

When to Use It: 

• You need a quick capital injection 

• You’re launching a campaign, hiring staff, or buying inventory 

• You have no assets to secure a loan 

Example: A marketing agency uses an unsecured loan to fund upfront costs for a large project, with repayment aligned to the project’s client payment schedule. 

4. Equipment Finance / Lease 

Best for: Using equipment without upfront ownership 

Also known as: Finance lease, operating lease 

Equipment finance allows you to use the asset without buying it outright. Depending on the lease type, you may own it at the end, return it, or upgrade. 

Key Benefits: 

• Lower monthly payments than purchase 

• Option to upgrade equipment regularly 

• Keeps assets off the balance sheet (for some leases) 

• Tax-deductible lease payments (in many cases) 

When to Use It: 

• You work in a tech-heavy or equipment-dependent industry 

• You want to upgrade every 2–3 years 

• You want to preserve capital and keep liabilities low 

Example: A dental clinic leases diagnostic equipment with a buyout option after 3 years, preserving cash for expansion. 

5. Refinance or Debt Consolidation 

Best for: Restructuring existing finance for better terms 

Also known as: Business loan refinance, debt reset 

If you’ve already taken out one or more business loans, refinancing could save you money—or help you grow faster with less friction. 

Key Benefits: 

• Lower interest rates if your credit or financials have improved 

• Reduce monthly repayments by extending the term 

• Combine multiple debts into a single repayment 

• Free up cash for reinvestment 

When to Use It: 

• Your existing loan is no longer competitive 

• You’re managing multiple high-interest debts 

• You need to improve cash flow before taking on new finance 

Example: A logistics company consolidates three separate finance contracts into one facility—cutting monthly repayments by 30%. 

Final Thoughts: The Smartest Loan Is the One That’s Structured for You 

There’s no one-size-fits-all loan. The best structure depends on: 

• What you’re funding 

• How your business earns income 

• Your short- and long-term goals 

• The strength of your financial profile 

That’s why working with a broker matters. At Thrift Capital, we don’t just find loans—we help tailor structures that reduce risk, improve approval odds, and support smarter business growth. 

Ready to Find the Right Fit? 

Swith a Thrift Capital broker for tailored advice 

Download our Pre-Approval Checklist to get started 

Structure your finance smarter—and grow with confidence