Set up a line of credit before 'tomorrow' becomes urgent

Every business owner who has scrambled for money the night before a deadline has had the same thought afterwards: “I never want to do that again.” A standby line of credit is how many owners make sure they don’t.

The idea is simple. You arrange an approved limit while things are calm. When a bill lands unexpectedly, you draw what you need, usually the same day, and repay it as customers pay you. Tomorrow’s problem becomes today’s quick transfer.

How does a standby line of credit work?

A business line of credit is a revolving facility. Once it’s approved, you have a limit, and you can:

• Draw part or all of the limit when you need it.
• Repay as money comes in, reducing the balance.
• Redraw the repaid amount again later, within the limit.

You generally pay for what you use, though some facilities also carry fees for having the limit available. Your specialist will explain the full cost structure before you commit, and every facility is priced on the business’s situation.

For businesses without property to offer, unsecured and cash-flow line-of-credit options are sized on turnover and bank statements, typically within the $5,000 to $500,000 range for unsecured facilities. Property can support a larger limit if needed.

Which businesses benefit most from standby funding?

A line of credit shines when money coming in and money going out don’t line up, even though the business is fundamentally healthy.

Pattern	Why a standby limit helps
Customers pay on 30–60 day terms, suppliers want payment on delivery	Draw to pay the supplier, repay when the invoice is paid
Seasonal peaks that need stock bought early	Draw before the season, repay as sales come in
Payroll every week, customer receipts every month	Smooth the weeks where wages fall before receipts
Occasional big one-off costs, like equipment repairs	Avoid applying from scratch each time
Large customers who sometimes pay late	Cover the gap without chasing a new loan

Large businesses and some government enterprises must report their payment times to small suppliers under the federal Payment Times Reporting Scheme, which exists precisely because slow payment strains small business cash flow. A standby limit is a practical buffer against that strain.

If one of these patterns sounds like your business and you’re facing a deadline right now, solve today first. Tell us what’s due and we’ll talk about the longer-term setup once tomorrow is handled.

Why set it up in a quiet week?

Timing matters in two ways.

Your statements look better. A lender reading three calm months of steady deposits sees a healthier business than one reading the week everything went wrong. You’ll often be offered a better structure when you’re not in a hurry.

You can make better choices. Without a deadline, you can think about the right limit, the repayment pattern and whether the ongoing cost makes sense. The night before a deadline, you’ll take what’s available.

A useful rhythm is to review your cash buffer at the end of each quarter, after BAS. If the last quarter had one or more “due tomorrow” moments, that’s your signal to arrange a standby limit while the next quarter is still ahead of you.

How big should a standby limit be?

There’s no universal answer, but a practical starting point is to look at your worst recent gap:

1. Find the week in the last six months where cash was tightest.
2. Add up what you needed to pay that week and what you actually had.
3. Add a margin for growth or an unexpected repair.

That figure is your realistic buffer. Our ten-day cash calendar guide shows a simple way to spot these gaps before they turn into late-night emergencies. A limit you rarely touch is still doing its job; a limit you’re always maxing out is a sign the business needs a different conversation.

When a standby limit isn’t the right answer

A line of credit smooths timing. It doesn’t fix a business that is losing money every month. If the gaps are getting bigger each quarter, it’s worth sitting down with your accountant to look at pricing, costs and debtor terms before adding more credit. business.gov.au has practical guidance on improving cash flow that is worth a read alongside any finance.

It’s also not a replacement for an urgent, larger one-off need such as a property settlement or a major equipment purchase. For those, property-secured funding or a term facility is usually the better fit.

What will a lender look at for a standby limit?

Much the same as for any unsecured or cash-flow facility: recent business bank statements for every account, your ABN and entity details, ID for each director, and a sense of your cash cycle. The difference is that there’s no deadline, so the lender can read calmly and you can ask questions. Our pages on bank statements and ID and entity documents apply just as well to a planned application as to an urgent one.

Set up tomorrow’s safety net today

If you’ve had one too many “due tomorrow” nights, a short conversation can map out a standby facility that fits your cash cycle. Enquiring takes about 60 seconds and won’t trigger a credit check. Your enquiry isn’t passed around to a list of lenders — a real specialist looks at your trading pattern and rings you to talk it through. Answer the form accurately, including your turnover and any existing facilities, so the first suggestion is the right one.

Talk to us about a standby limit →