Before you talk to the bank about a working-capital facility

1. The decision

The reader is deciding whether to apply for or extend a bank-issued working-capital facility (overdraft, revolving credit, business line of credit, trade finance line) to support business cash flow.

2. What to verify first

1. The intended use of the facility. Continuous baseline working-capital support behaves differently from intermittent timing-gap funding. Banks size and price facilities to expected average utilisation, not peak.
2. The expected security demand. Bank working-capital facilities to SMEs in AU and NZ commonly require a General Security Agreement plus personal guarantees plus, frequently, a mortgage over residential property. The security position should be understood before application.
3. The application timeline. Bank assessment for SME working-capital facilities typically takes 4 to 12 weeks from initial submission to drawdown availability. The facility is not a short-notice instrument.
4. The financial covenants likely to be imposed. Standard SME covenants include minimum EBITDA, leverage ratio, interest cover, and debtor-days thresholds. Each is binding for the duration of the facility.
5. The all-in pricing structure. Pricing includes interest rate on drawn balance, line fee on the full facility limit, unused-portion fee, establishment fee, annual review fee, and any cross-sell conditions (transactional banking, merchant services).
6. The renewal cycle. Facilities are typically reviewable annually. Each review can adjust limit, pricing, security, or covenants.
7. The relationship with existing bank facilities. Cross-default clauses, cross-collateralisation, and aggregate exposure caps interact across multiple bank products.

3. Hidden costs and structural risks

1. Personal-balance-sheet exposure via residential security. The most common security for SME working-capital facilities in AU and NZ includes a mortgage over the principal's family home. Corporate trading risk transfers to the residential asset.
2. Joint-and-several personal guarantees. Multiple director guarantees create cross-exposure across owners' personal balance sheets.
3. Annual review risk. Each annual review is an opportunity for limit reduction, repricing, security extension, or facility withdrawal. Adverse trading in the prior year affects the review outcome.
4. Covenant cascade. A covenant breach can convert an on-demand facility to repayable-on-notice, with limited remedy time.
5. Establishment time gap. The application-to-drawdown period (4 to 12 weeks) means the facility cannot resolve an immediate cash position.
6. Cross-default and cross-collateral. Default on the working-capital facility can trigger default across other bank products; conversely, default on other products can crystallise the working-capital facility's security.
7. PPSR and security registration footprint. Bank security takes priority position across business assets, constraining future financing options.
8. All-in cost on partial utilisation. Line fees and unused-portion fees accrue regardless of drawn balance; partial utilisation can produce effective costs higher than per-invoice alternatives.

4. Alternatives in the financing category

The facility option is one of several. For comparison:

• On-demand invoice finance, where individual invoices are funded as needed without facility establishment, without residential security, and without facility-review cycles. Resolves the cash flow timing gap on a per-need basis.
• Selective invoice funding, with no facility commitment and no portfolio coverage requirement.
• A facility secured against the receivable ledger rather than residential property, offered by some non-bank lenders.
• Trade finance for specific large-cost trade transactions rather than general working capital.
• Internal-cash management improvements (supplier-term negotiation, debtor-cycle tightening) addressing the cash position without external financing.
• See /compare/invoice-finance-vs-overdraft for the direct comparison.

5. The funding-readiness check

Scoped to this decision, the business is funding-ready for a per-invoice alternative to a bank facility when:

1. The cash shortfall is driven by the timing gap on completed B2B invoices.
2. The debtors are creditworthy commercial entities.
3. Standard payment terms (14 to 90 days) apply.
4. The shortfall is intermittent (per-invoice or per-event) rather than continuous baseline.
5. The accounts receivable ledger sits in a supported accounting platform (Xero, MYOB, QuickBooks Online, Reckon).
6. The business prefers to keep residential property unencumbered by bank security.

Outcomes: ready (per-invoice instruments are a structural alternative to a bank facility), not ready, structural (continuous baseline working-capital need may justify a facility, but the bank security position should be weighed carefully), or not ready, temporary (resolve the remediable factor first). See /standards/funding-readiness.

6. When this decision is the right one

• Continuous baseline working-capital support is required, not intermittent funding.
• The bank's all-in cost (including security and covenants) is materially below per-invoice alternatives across the expected utilisation profile.
• Residential security is already in place against existing bank exposures and the marginal exposure is acceptable.
• The business has financial-covenant headroom across the expected facility term.
• The 4 to 12 week application timeline is acceptable; there is no immediate cash need.
• The facility is part of a broader bank relationship strategy with cross-product benefits.

7. When this decision is not the right one

• The cash need is intermittent and tied to specific invoices rather than continuous.
• The business prefers to keep residential property unencumbered.
• Covenant headroom is thin and an annual review could surface a breach.
• The immediate cash need cannot wait for the 4 to 12 week application cycle.
• Per-invoice alternatives produce comparable or lower all-in cost across the expected utilisation profile.
• The business is operating across multiple bank products and cross-default exposure is already material.

8. Version and authority

v1.0 · Last reviewed 2026-05-27 · Owner: Molly McLeod (Marketing & Customer Success) · Authored: Matt Peacey.

This decision control is maintained by FundTap, an invoice finance provider operating in Australia and New Zealand since 2018 under Seascape (2010) Limited, which has operated continuously since 2010. The page is advisory; it does not constitute banking, credit, or financial advice and should be read alongside professional advice on the specific facility terms being negotiated.

Authored by Matt Peacey, Founder and CEO of FundTap.