The two models, simply explained
The non-bank commercial lending market in Australia is dominated by two distinct models. They are often grouped together as "alternative lending" or "non-bank finance," but they assess credit risk in fundamentally different ways.
Cash flow lending
Cash flow lenders assess risk based on the business's revenue, trading history and cash flow patterns. The borrower submits bank statements (typically 3 to 12 months), BAS lodgements, and sometimes accounting reports. The lender models forward cash flow capacity, sets a loan size based on monthly turnover, and structures repayments as a percentage of daily, weekly or monthly revenue.
Australian examples include Bizcap, Prospa, Moula, ScotPac, GetCapital, OnDeck, Lumi and similar. Loans are typically unsecured against any specific asset (though a general security agreement or GSA over business assets is common). Approval takes 1 to 5 business days. Loans typically run 6 to 36 months.
Asset-based lending
Asset-based lenders assess risk based on the value of a specific asset offered as security. The borrower nominates an asset (vehicle, machinery, equipment, inventory, art, gold). The lender values the asset independently and lends a percentage of that value (typically up to 70%). The borrower's trading history, revenue and cash flow are not assessed because they don't determine the loan's recovery if it falls over: the asset does.
Approval is faster. Indicative term sheets issue within 2 hours. Settlement happens same-day once the asset is secured. Loans typically run 1 to 9 months.
Cash flow lenders look at what flows through your accounts. Asset-based lenders look at what you own. The product you need depends on which of those is stronger.
For more on the underlying mechanics of asset-based lending, see our complete Australian guide to asset-based lending.
Side-by-side comparison
The practical differences play out across nine dimensions:
| Cash flow lending | Asset-based lending | |
|---|---|---|
| Assessment basis | Trading history, revenue, cash flow | Asset value |
| Documents required | Bank statements, BAS, sometimes financials | Identity, asset details, ABN |
| Credit check | Yes | No |
| Minimum trading history | 4 to 12 months typically | Not required |
| Minimum revenue | $10K–$20K per month typically | Not required |
| Security | Unsecured or general security (GSA) | Specific asset |
| Time to funding | 1–5 business days | Same day (once asset secured) |
| Typical term | 6–36 months | 1–9 months |
| Repayment structure | Daily or weekly direct debit | Single repayment or rollover |
The differences explain why a business that suits one model may not suit the other at all.
When cash flow lending is the right choice
Cash flow lending is the right tool when the following conditions hold:
You have a stable trading history
If your business has been trading consistently for at least 6 to 12 months with revenue above the lender's minimum threshold (typically $10,000 to $20,000 monthly), you're in the cash flow lender's sweet spot. The model is calibrated to predict your future revenue from your past pattern.
You don't have a substantial unencumbered asset
If your business owns equipment but most of it is leased, financed or already secured against other facilities, you may not have enough unencumbered asset value to support asset-based lending. Cash flow lending doesn't require a specific asset, which removes this obstacle.
The funding need is genuinely cash-flow related
Cash flow lenders price for cash flow gaps: a slow-paying customer, seasonal trading variation, marketing investment, hiring ahead of revenue. Their daily and weekly repayment structures match the cash flow patterns they're solving for.
You want a longer term than asset-based lending offers
If you need 12, 18, or 36 months to repay, cash flow lenders structure that. Asset-based lenders typically don't. For longer-duration borrowing where speed is moderate (days, not hours), cash flow lending fills the gap between bank lending and asset-based lending.
You can absorb the daily repayment cadence
Cash flow lenders often debit a fixed amount daily or weekly. This works for businesses with high transaction volumes and consistent receipts. It can be painful for businesses with lumpy revenue or thin operating margins.
When asset-based lending is the right choice
Asset-based lending is the right tool when the following conditions hold:
Speed is the dominant factor
If the funding need is days, not weeks, asset-based lending is the faster option. Same-day settlement vs 1 to 5 business days makes a meaningful difference when the deal closes Friday, the tax bill is due Monday, or the supplier deadline is tomorrow.
Your trading history doesn't qualify
If your business is new, has had a trading interruption, has declining revenue, or doesn't meet a cash flow lender's minimum thresholds, the asset-based model doesn't penalise any of that. The asset is the assessment. New businesses with a $100K piece of equipment can borrow against the equipment without any trading record requirement.
Your credit or financials are complicated
Cash flow lenders run credit checks and review financials, even if they advertise "fast approval" or "bad credit OK." Asset-based lenders typically run neither. If credit history is the obstacle, asset-based lending bypasses it. See our page on no credit check business loans for more on this.
The need is short-term and event-driven
If you need funds for 60 days to bridge a refinance, or 4 months until a property settlement, or 3 months until receivables convert, asset-based lending matches the duration. Taking a 24-month cash flow loan to solve a 90-day problem is overbuilding for the situation.
You own an asset of sufficient value
This is the threshold question. If you have an unencumbered asset worth at least $30,000 (vehicles, equipment, inventory, art, gold), asset-based lending is on the table. If you don't, it isn't, and cash flow lending may be the only non-bank option available.
Real scenarios: which would you choose?
Three scenarios that come up most often in non-bank commercial finance.
Hospitality business, $40K growth funding, steady revenue
A cafe owner has been trading 3 years with consistent monthly revenue of $80,000. She wants $40,000 to fit out a second location, with the new site expected to add revenue within 6 months. No major unencumbered assets.
Cash flow or asset-based? Cash flow lending. The business is exactly the cash flow lender's target profile: established trading, consistent revenue, growth use case, no asset to secure against. Asset-based lending isn't even on the table without an asset.
Construction business, $180K ATO debt, asset-rich but revenue declining
A construction company has fallen behind on tax due to slow client payments. Revenue has dropped from $200K monthly to $90K over the last six months. The business owns $400K of unencumbered earthmoving equipment.
Cash flow or asset-based? Asset-based, almost certainly. Cash flow lenders will see the declining revenue and decline or offer a much smaller facility. ATO debt is another red flag for cash flow assessment. Asset-based lenders don't assess either factor. The $400K equipment supports a $180K loan comfortably at 45% LVR.
Transport business, $80K stock buy opportunity, closes in 4 days
A wholesale parts business is offered a bulk inventory purchase at 35% discount, but payment is required by end of week. The business trades $150K monthly, has clean financials, and owns $250K of unencumbered fleet vehicles.
Cash flow or asset-based? Asset-based. The business would qualify for cash flow lending easily on the financials, but the 4-day timeline doesn't allow for cash flow assessment. Even Bizcap's "same-day" claim usually means same-day-after-approval, with approval itself taking 24 to 48 hours. Asset-based lending settles same-day on the asset, full stop.
Cost dynamics: it's not as simple as one being cheaper
The marketing of both products tends to position the other as expensive. The reality is more nuanced.
Cash flow lending prices for unsecured risk and trading-record dependency
Because cash flow lenders generally don't hold specific asset security, they price for the risk of recovery if the business falters. Rates vary significantly based on trading strength, credit profile and loan size, but typically sit in a wider band than asset-based lending. A strong business with clean financials may get a comparable rate to a bank facility. A weaker business with thin financials may pay considerably more.
Asset-based lending prices for speed plus asset risk
Asset-based lenders hold specific security and recover loans from the asset if needed. This reduces credit risk relative to unsecured lending but adds operational complexity (asset storage, valuation, monitoring, eventual disposal in worst case). Asset-based pricing is typically more consistent across borrower profiles because the assessment doesn't depend on the borrower's profile.
Where each tends to be cheaper
- Cash flow lending tends cheaper for: strong-trading businesses with clean credit borrowing for 12+ months. The longer term lets the unsecured premium amortise.
- Asset-based lending tends cheaper for: short-term needs (60 to 180 days), borrowers with weak trading or credit profiles who would face high cash flow rates, and businesses with substantial unencumbered assets.
The trap to avoid
Don't compare a 9-month asset-based rate to a 36-month cash flow rate without normalising for time. A monthly rate looks higher than an annual rate by definition, but the actual cost over the loan period may be lower if the asset-based loan is repaid in 3 months and the cash flow loan runs for 24. The right comparison is total cost of borrowing over the actual term you need.
A practical decision framework
If you're not sure which to choose, work through these four questions.
Question 1: Do you have an unencumbered asset worth at least $30,000?
If no, asset-based lending isn't viable. Cash flow lending may be the only non-bank option. If yes, asset-based lending is on the table and the next questions become relevant.
Question 2: Do you have at least 6 to 12 months of consistent trading at $10K+ monthly revenue?
If no, cash flow lending probably won't approve you. Asset-based lending doesn't assess this. If yes, both options are available and other factors decide.
Question 3: How quickly do you need the funds?
If 5 days or less, asset-based lending wins on speed. If you can wait 1 to 2 weeks, cash flow lending becomes competitive.
Question 4: How long do you need the funds for?
If under 9 months, asset-based lending matches the duration. If 12 to 36 months, cash flow lending matches better. Mismatched duration usually means paying for capacity you don't need.
The right product is the one whose risk profile matches yours. Cash flow lenders match strong-trading businesses. Asset-based lenders match asset-rich businesses with time pressure.