Different Loan Structures and When to Use Them
Choosing the right loan structure is just as important as the rate. Learn when to use a chattel mortgage, unsecured loan, lease, or refinance to support growth.
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. 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 5 main types of loan structures, and how to choose the right one at the right time for your business.
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 of Chattel Mortgages:
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 A Chattel Mortgage:
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. Business 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 of Line’s of Credit:
Only pay interest on what you use
Continuous access to funding without reapplying
Ideal for variable working capital needs
When to Use A Line of Credit:
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 For Business Loans:
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 A Business Loan:
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. Operating Lease
Best for: Using equipment without upfront ownership
Also known as: Finance lease
An Operating Lease 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 of A Finance Lease:
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 A Finance Lease:
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 of A Refinance:
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 Refinance:
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.
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