Moving business debt off your personal credit cards

It’s a pattern we hear often. The business has been trading for a few years and doing reasonably well, but along the way the owner has put stock, fuel, software, a tool or two and the occasional supplier bill on personal credit cards. Maybe a personal loan paid for the ute. Now there are two or three cards near their limits and a personal loan on the side — all quietly funding the business.

The good news: when that debt genuinely funded the business, there can be a way to move it into a proper business structure.

When can personal debt be refinanced into a business loan?

The key word is purpose. Business-purpose finance can only be used for business purposes. ASIC’s guidance explains that credit is consumer credit when it is predominantly for “personal, domestic or household purposes”. So:

• Card balances that paid business suppliers — potentially eligible.
• A personal loan that bought business equipment — potentially eligible.
• Card balances from a family holiday or household spending — not eligible for a business loan.
• Mixed cards — only the business portion, and only if you can show it.

We only arrange business-purpose finance, so we’ll be clear with you about which parts qualify and which don’t.

What evidence do lenders want?

Because personal cards are, by default, personal, the lender needs to be satisfied that the debt truly funded the business.

Evidence	What it shows
Card statements	Payments to suppliers, fuel, business software
Matching invoices or receipts	That those payments were business costs
Your accountant’s or bookkeeper’s reconciliation	How those costs were recorded in the business’s books
Business bank statements	That the business has been paying the cards, or the owner has
A list of debts with what each funded	The overall picture in one page

The better your records, the easier this is. If you’re not sure your records are good enough, the money-mixing check will help you see where the gaps are.

What kind of business loan replaces the cards?

It depends on why the cards were being used.

Constant cash-flow gaps — paying suppliers before customers pay — suit a business line of credit sized on turnover, so you have a facility built for exactly that job.

A one-off purchase — a vehicle, a machine, a fit-out — suits a term loan matched to the life of the asset.

A mixture — sometimes a term loan to clear the old balance plus a smaller line of credit for day-to-day gaps is the right shape.

Unsecured and line-of-credit options for trading businesses typically run from $5,000 to $500,000. If you’d like to know which structure fits, start a 60-second enquiry and list the balances and what they funded.

What are the pitfalls?

Refinancing only helps if it fixes the underlying habit. Watch out for:

1. The balance growing back. If the business still has the same cash-flow gap, the cards will fill up again unless there’s a proper facility in place.
2. Blurring again. Once the cards are cleared, keep business costs off them.
3. Company structures. If the business is a company and the cards are yours, the company has effectively been funded by you. Your accountant should record that — see lending money to your company.
4. Total cost. Compare the total cost of the new facility, including fees, with what you’re paying now. We don’t publish rates because every business loan is priced on the individual situation.

Illustrative example: A sole trader plumber has $28,000 across two personal cards. His bookkeeper shows about $22,000 was plumbing supplies and fuel, and the rest was personal. A lender considers refinancing the $22,000 business portion into a business line of credit sized on his turnover. He pays the $6,000 personal balance down himself, and from then on supplies go on a business-only card.

How does this help your personal position?

Paying down personal cards reduces the personal credit you’re carrying, which can make a difference the next time you apply for anything — including a home loan. Moneysmart notes that credit reports include your credit products and repayment history, so fewer maxed-out personal cards generally paints a healthier picture. It also makes tax time simpler: the ATO allows only the business portion of mixed expenses to be claimed, and clean separation makes that portion obvious.

Is it better to just pay the cards down from cash flow?

If the business can comfortably do that within a few months, it may be the simplest option — no new loan needed. A refinance makes more sense when the balances are large, the cards are costing a lot, or the business needs a proper facility for ongoing gaps. Our page on mixing personal and business debt helps you think it through.

What should you gather before enquiring?

A simple one-page summary saves a lot of back-and-forth. List each card or loan, its current balance, the monthly repayment, and roughly how much of it funded the business. Add your average monthly business deposits and whether you own property. You don’t need every invoice on day one — the specialist will tell you which evidence the matched lender will want — but having the summary ready shows you understand your own position, and that counts for a lot.

Untangle it with one person on your side

You don’t need to be embarrassed about how the cards got there — most owners have been in the same spot. The enquiry takes about 60 seconds with no credit check, and it goes to one specialist rather than being fired off to a list of lenders. They’ll call you to go through the balances and what they funded. Please be accurate about which debts were business and which were personal; it’s the only way we can find the right structure the first time.

Show us what the cards are carrying →