Quick answer
A working capital facility is a revolving limit that funds the gap between paying for stock, wages and overheads and collecting cash from customers. For an established SME it's sized on turnover, the cash conversion cycle and security. Property-secured facilities run from $20,000 to $5,000,000; unsecured cash-flow limits typically run from $5,000 to $500,000, based on turnover and bank statements.
Key points
- Size the facility to the part of the cash cycle you can't compress, not to a round number.
- Property security widens the range to $5,000,000; unsecured limits are sized on turnover and bank conduct.
- Revolving limits suit recurring gaps; term debt suits one-off needs like a stock build or capex.
- Lenders look at debtor quality, stock turnover and how the account has been run.
- Property-secured
- $20k – $5m
- Unsecured
- Typically $5k – $500k
- Structure
- Revolving or term
- Enquiry
- No credit check
What does a working capital facility actually fund?
Working capital is the money locked inside the operating loop: stock bought but not yet sold, invoices issued but not yet paid, less the bills your suppliers are letting you pay later. The business.gov.au glossary puts it simply — it’s the cash available for day-to-day expenses. For an established SME, the question is rarely whether that loop exists. It’s whether the funding behind it has kept pace with the business.
A working capital facility is a limit you draw when the loop stretches and repay as it unwinds. It pays wages in the fortnight before a large customer settles. It carries stock through a seasonal build. It absorbs the extra debtors that a bigger contract brings. Used well, it’s the shock absorber between a profitable income statement and a bank balance that doesn’t always agree.
What it shouldn’t fund is a permanent loss, a long-life asset or a one-off transaction. Those belong in term debt, where repayments are scheduled against the life of the asset or the deal. Mixing the two is one of the most common reasons an SME finds itself fully drawn and unable to explain why.
How big should the limit be?
Start with the cash conversion cycle: debtor days plus inventory days, less creditor days. Multiply the result by daily turnover and you have a rough measure of the working capital your model ties up. The working capital cycle calculator does this properly, using cost of sales for stock and creditors.
Then subtract what you can release operationally. Tighter collections, leaner stock or better supplier terms each free cash, and a lender will ask what you’ve already tried. The residual — the structural part of the cycle — is what the facility should carry, plus headroom for your lumpiest month.
| Illustrative business | Turnover | Cycle | Approx. tied up | Facility logic |
|---|---|---|---|---|
| Industrial distributor | $12m | 74 days | $2.4m | Part funded by own cash; facility covers seasonal peak |
| Professional services firm | $6m | 48 days (WIP + debtors) | $0.8m | Smaller revolving limit for lock-up |
| Food manufacturer | $25m | 55 days | $3.8m | Property-backed facility plus supplier terms |
Illustrative figures only, calculated as turnover × cycle ÷ 365. No real businesses.
Revolving limit or term loan?
A revolving facility suits a gap that opens and closes repeatedly. You pay for what you use, and the limit is available again once repaid. The trade-off is review: revolving limits tend to be reassessed, and a bank can hold or cut them at renewal. If that’s already happened to you, see what to do when an overdraft limit is reduced.
A term facility suits a gap that opens once — a stock build for a new product line, a jump in debtors after winning a major account, or a permanent step up in turnover. Repayments are scheduled, which gives certainty but less flexibility.
Many established businesses end up with both: a term piece funding the permanent layer of working capital and a revolving piece funding the swing.
What security sits behind it?
Security decides the size and shape of what’s possible.
- Property-secured. A first mortgage, second mortgage or caveat over residential or commercial property supports facilities from $20,000 to $5,000,000. Property security widens the range and generally gives a lender more room to accommodate a messy year or a thin balance sheet. See property-backed business loans.
- Unsecured, cash-flow based. For trading businesses without property to offer, unsecured and line-of-credit options typically run from $5,000 to $500,000. They’re sized on turnover and bank statements, so account conduct matters: dishonours, persistent limit breaches and irregular deposits all weigh on the outcome.
- Receivables-based. Some businesses fund against the debtor ledger itself. That’s a specialist structure with its own reporting obligations; we compare it on the page about debtor finance alternatives.
If you’re weighing which of these fits, you can ask a specialist which structure suits your balance sheet — the enquiry takes about a minute and doesn’t touch your credit file.
What do lenders test before approving a limit?
Lenders read a working capital request through four lenses.
- Trading performance. Recent financial statements and management accounts, and whether margins are stable. The RBA’s October 2025 Bulletin noted that most small businesses remained profitable, but a lender wants to see yours is.
- Quality of the loop. Aged debtors (how much is over 60 or 90 days), customer concentration, stock turnover and any obsolete inventory.
- Account conduct. How the existing accounts have been run — swings, limit breaches, returned payments, and whether statutory obligations like BAS and super are paid on time.
- Purpose and exit. Why the limit is needed now and how it will be reduced if trading changes.
A clear answer to each of those makes the difference between an approval that fits and one that’s been trimmed to the lender’s comfort level.
When does a facility become a warning sign?
A facility that’s permanently drawn to the limit has stopped working as working capital. It’s funding something else: losses, an unplanned asset purchase, or a cycle that has blown out. Watch for these:
- the limit hasn’t fallen below 80% utilisation in six months
- debtor days are creeping up quarter on quarter
- supplier terms are being stretched informally to stay inside the limit
- ATO lodgements or payments are slipping to protect the facility
If you’re seeing two or more, the right answer may be restructuring the debt rather than simply increasing the limit. Our guide to overtrading warning signs walks through the diagnosis.
Could your business qualify?
If your business trades profitably, has a cycle you can measure and a clear reason for the limit, there’s usually a structure that fits. Bring the numbers: turnover, the cycle, existing facilities and any property that could be offered.
Enquiring is free of any credit check, your financials stay with the specialist handling your file instead of being passed around a lender panel, and you’ll speak with a person who understands the balance sheet behind the request. Please fill in the form as accurately as you can — amount, security and existing debt especially — so the first conversation is about options rather than corrections. Start your working capital enquiry.
Frequently asked questions
How is a working capital facility different from an overdraft?
An overdraft is one type of working capital facility, attached to a transaction account. Others include standalone revolving lines of credit and property-secured facilities you draw and repay as needed. The practical differences are how the limit is sized, what security sits behind it, and how often the lender reviews it.
How much working capital should an SME carry?
Enough to fund the cash conversion cycle at your current turnover, plus a buffer for the lumpiest month of the year. Multiply your cycle in days by daily turnover for a first estimate; the working capital cycle calculator on this site does the arithmetic and splits stock and creditors at cost.
Can we have a working capital facility alongside our bank?
Often, yes. A second-ranking facility or a separate unsecured limit can sit alongside existing bank debt, though you should check your bank's facility terms for restrictions on additional borrowing or security before you proceed.
Does the business need property to qualify?
No. Trading businesses without property can be considered for unsecured cash-flow and line-of-credit options, typically $5,000 to $500,000 sized on turnover and bank statements. Property security widens the range and usually the flexibility.
Will the enquiry affect our credit file?
No. There's no credit check when you first enquire. A credit check is only discussed once you've seen a proposed structure and decided to go ahead.