This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.
The short answer
Credit that is predominantly (more than 50%) for business or investment purposes is generally outside the National Credit Code, and a business-purpose declaration signed by the borrower creates a presumption that the loan is for business purposes. That presumption does not hold if the lender, or the broker acting for the lender, knew or had reason to believe the credit was wholly or predominantly for personal purposes.
The declaration is only as good as the file behind it. This guide is general information, not legal advice; get your own legal or compliance advice and check your obligations with your aggregator or licensee.
Business purpose checklist for brokers
| Check | Why it matters | Evidence to keep |
|---|---|---|
| Stated purpose is specific | A vague purpose makes it hard to show the predominant purpose test is met | Written purpose statement with amounts and payees |
| More than 50% of funds go to business use | The predominant purpose decides whether the Code is likely to apply | Use-of-funds schedule that adds up to the loan amount |
| Purpose matches the documents | Inconsistencies can give the lender or broker reason to believe the purpose is personal | Invoices, contracts, ATO statements, settlement statements |
| No personal-use red flags | Knowledge of personal purpose removes the presumption the declaration creates | File note recording the questions asked and the answers |
| Declaration signed in the correct form | A declaration that is not in the prescribed form may not create the presumption | Signed declaration on the lender’s current form |
| Borrower understands the declaration | The declaration states the borrower loses protections of the Code | File note confirming the borrower read it and had the chance to get advice |
General information only. Get your own legal or compliance advice.
Why does business purpose matter for a private loan?
The National Credit Code regulates consumer credit: credit provided to individuals wholly or predominantly for personal, domestic or household purposes. Credit that is predominantly for business or investment purposes is generally outside the Code, which is why business-purpose lenders can operate without an Australian Credit Licence.
If a loan treated as business purpose is later found to be regulated, the lender may face remedies under the Code and the broker’s conduct may be examined. Test purpose at the start of the deal, not after the term sheet is signed.
How does the predominant purpose test work?
In general terms, the question is what more than 50% of the credit will be used for. If most of the funds go to a business or commercial purpose, the loan is generally outside the Code. If most go to personal, domestic or household purposes, it is likely to be regulated.
The test looks at the use of funds, not the type of borrower or security. Map every dollar of the loan to its use and check the business share is clearly above half.
What is a business-purpose declaration and what presumption does it create?
A business-purpose declaration is a signed statement by the borrower that the credit is to be applied wholly or predominantly for business or investment purposes. Under section 13 of the National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009), a declaration in the prescribed form (regulation 68 and Form 7 of the National Consumer Credit Protection Regulations 2010) creates a presumption that the credit is not for personal purposes, so the Code is presumed not to apply.
Under section 13(5), the declaration is ineffective if the lender or broker knew, had reason to believe, or would have found out on reasonable inquiry, that the credit was in fact to be applied wholly or predominantly for personal purposes. A declaration cannot cure a purpose you already know, or should suspect, is personal.
What red flags should make a broker stop and ask more questions?
Because the presumption is lost on "reason to believe", treat any sign of personal purpose as a reason to dig deeper or decline. Red flags include:
- The funds are for buying or refinancing a home the borrower lives in or plans to live in.
- Part of the loan pays out personal debts such as credit cards, personal loans or car finance.
- The purpose is vague, for example "general business purposes", with no supporting detail.
- Funds are paid to individuals for living costs, school fees or other household expenses.
- The purpose changes during the application, or the client is coached on what to say.
What file notes and evidence of purpose should brokers keep?
A strong file shows how the stated purpose was tested. Keep a use-of-funds schedule that reconciles to the loan amount, with documents supporting each line item.
Useful evidence includes supplier invoices, contracts, ATO statements of account, business plans or cash-flow forecasts, and settlement statements. Your file note should record the questions asked, the answers given and why you were satisfied the purpose is predominantly business. For examples of common business uses, see ATO and tax debt funding, urgent settlement finance and business loans. Terms such as LVR and first mortgage are explained in our glossary.
What are the broker’s own obligations?
Your obligations depend on your licensing or authorisation and on whether the loan is regulated. The best interests duty in section 158LA of the National Consumer Credit Protection Act applies to credit assistance for credit regulated by the National Credit Code, so it does not apply as a statutory duty to business-purpose credit. Aggregator rules, licence conditions and general law duties still apply, so document why the loan suits the client anyway.
Check with your aggregator or licensee before placing business-purpose private loans, and get your own legal or compliance advice.
Is an investment property purchase business purpose?
Be careful here. Although investment purposes are generally treated like business purposes for the predominant purpose test, the Code can still apply. Under section 5 of the National Credit Code, the Code applies to credit provided to a natural person or strata corporation wholly or predominantly for personal, domestic or household purposes, or to purchase, renovate or improve residential property for investment purposes, or to refinance such credit. Do not assume a residential investment purchase is unregulated because it is an investment.
Astro Capital Finance lends for business purposes only, meaning more than 50% of funds go to business or commercial use. We do not offer consumer loans or owner-occupied home loans.
How does Astro work with brokers on business-purpose loans?
Through Astro Capital Finance for brokers, we provide short-term business-purpose loans from $50k to $5M (larger loans may be considered by exception), for terms of 1 to 24 months, secured by a registered first mortgage. See private mortgage finance for how first mortgage lending works.
- Every fee is shown on the term sheet.
- The term sheet matches the loan documents.
- No commission clawback.
- A same-day indicative answer on complete scenarios, subject to assessment.
- Direct access to decision-makers.
- Approval in as little as 3 hours and settlement in as little as 72 hours, subject to assessment.
Frequently asked questions
No. The declaration creates a presumption, but the presumption does not apply if the lender or the broker acting for the lender knew or had reason to believe the credit was wholly or predominantly for personal purposes.
In general terms, more than 50% of the credit must be for business or investment purposes for the loan to be predominantly business purpose. Astro requires more than 50% of funds to go to business or commercial use.
The security does not decide the purpose; the use of funds does. A loan secured by residential property can be business purpose if the funds are predominantly for business use, but buying or refinancing a home to live in is not business purpose and Astro does not lend for it.
Not as a statutory duty. The best interests duty in section 158LA of the NCCP Act applies to credit assistance for Code-regulated credit, not business-purpose credit. Aggregator rules, licence conditions and general law still apply, so document suitability anyway and check with your aggregator or licensee.
We aim to give a same-day indicative answer, with approval in as little as 3 hours, subject to assessment. Call 1300 278 761 or email loans@astrocapital.com.au, Monday to Friday 8:30am to 5:30pm Sydney time, or use our [contact page](/contact).
This guide is general information only, current as at the 'last updated' date above. It is not legal, tax or financial advice and does not take your circumstances into account. Astro Capital Finance provides credit for business purposes only and is not a tax agent, lawyer or financial adviser. Seek advice from a qualified professional before acting. Lending is subject to assessment, security and an acceptable exit strategy.