Quick answer
Standby funding is a finance facility — usually a business line of credit — arranged while a business is trading well, then left ready for the moments it's needed. Applying when you're not under pressure means stronger bank statements, more options, time to compare offers and better terms. Once it's set up, drawing on it takes minutes, which makes the next payroll, BAS or supplier crunch a non-event.
Key points
- Lenders assess your recent statements — they look best before a crunch, not during one.
- A line of credit is the most common standby facility.
- Size the limit to your realistic worst month, not the maximum on offer.
- Check for fees on unused limits before choosing a size.
- Use it for timing gaps and repay it — don't let it become permanent debt.
Here’s an uncomfortable truth about business finance: you look your best to a lender when you need it least. In a strong month, your bank statements show healthy balances, steady deposits and no stress. In a crunch week, they show the opposite — and that’s usually when owners apply. Standby funding flips the timing. You arrange it while things are calm, and it sits there ready for the day you need it.
What is standby funding?
It’s any facility you set up in advance and only draw on when needed. For most businesses that means a business line of credit: a limit you can draw, repay and draw again, usually paying interest only on what you’ve used.
Think of it as the business equivalent of a spare tyre. You don’t plan to use it this week, but when you do need it, having to go and buy one on the side of the road is a much worse experience.
Why is applying early better?
| Applying while calm | Applying in a crunch | |
|---|---|---|
| Bank statements | Healthy balances, steady deposits | Low balances, maybe a dishonour |
| Options | Line of credit, property-secured, unsecured | Whatever funds fastest |
| Time to compare | Days or weeks | Hours |
| Negotiating position | Strong | Weak |
| Your state of mind | Clear | Under pressure |
A lender reading six months of statements is looking at your most recent months. If you apply after a few strong ones, that’s what they see. If you wait until a slow month and a late customer have drained the account, the same business can look riskier.
What situations is standby funding built for?
The gaps that recur, even if you can’t predict exactly when:
- Payroll and super. Since 1 July 2026, Payday Super means super must be received by employees’ funds within 7 business days after each pay run, according to the ATO. A late customer payment can now squeeze wages and super together. See payroll shortfall.
- BAS quarters. Quarterly BAS lands on 28 October, 28 February, 28 April and 28 July. A big quarter can mean a big bill.
- Seasonal stock. Buying ahead of the busy period — see stock before peak season.
- Supplier opportunities. A discount or allocation that needs payment this week.
- Breakdowns and surprises. Equipment failures, urgent repairs, a customer going under.
If one of these is on your horizon, it’s worth starting a conversation now rather than in the week it arrives.
How big should a standby facility be?
Not as big as possible. A sensible way to size it:
- Find your worst realistic month. Look back over a year of bank statements for the deepest dip below your comfortable balance.
- Check your calendar. Our cash crunch calendar shows where BAS dates, pay runs and shutdowns collide in 2026–27.
- Add a buffer — perhaps a quarter more — for the month that’s worse than any you’ve seen.
- Weigh the cost of the unused limit. If the facility charges a line fee on the full limit, a smaller limit you’ll use may beat a large one you won’t.
- Remember future borrowing. Lenders count existing limits when you apply for something else, even if they’re unused.
Unsecured lines typically sit within the $5,000 to $500,000 range, sized on turnover and bank statements. Property security can support a larger limit.
Unsecured or property-secured standby?
| Unsecured line of credit | Property-secured line of credit | |
|---|---|---|
| Limit | Sized on turnover | Sized on equity |
| Set-up speed | Often within a day | A few days (valuation, registration) |
| Cost | Generally higher | Generally lower |
| Security | No property (often a director’s guarantee) | Mortgage or caveat over property |
| Best for | Smaller, frequent gaps | Larger gaps, longer-term standby |
Because you’re arranging it in advance, the extra days a property-secured facility takes usually don’t matter — another advantage of planning early.
How do you stop standby funding becoming permanent debt?
A line of credit is easy to draw and easy to forget. A few rules keep it working for you:
- Use it for timing, not losses. If you’re drawing every month to cover costs the business can’t meet, the problem isn’t timing.
- Set a zero target. Aim to bring the balance back to nil regularly — after each busy period, or quarterly.
- Watch the trend. If the lowest balance in each cycle is creeping up, investigate why.
- Review annually. Is the limit still the right size? Is the cost still competitive?
Our guide on when fast finance is the wrong answer covers the warning signs.
What does good standby planning look like? An illustrative example
A Hobart outdoor-gear retailer has a strong winter and a weaker summer. Every January, the owner used to scramble for a short-term loan to buy next winter’s stock at early-order prices, applying just after the quiet summer months had thinned the account.
In August, after three strong winter months, she applies for a $90,000 unsecured line of credit. Her statements look as good as they ever will; the facility is set up within two days. It sits unused until January, when she draws $70,000 for the stock order. Winter sales repay it by July. The following January, she does the same again — with no application, no rush and no scramble. The facility charges a modest fee on the unused limit, which she treats as the cost of never having to apply in a hurry again.
How do you get ready to apply?
The same preparation that speeds up any application:
- Six months of statements from every business account.
- ID for each director.
- ABN details and recent BAS.
- For property-secured lines, the rates notice and current mortgage statement.
A finance-ready folder makes this a ten-minute job, and it keeps you ready for the next review too.
What questions should you ask before choosing a facility?
Standby facilities differ more than their headlines suggest. Before you sign, ask:
- What does it cost if I don’t draw at all? Line fees, account fees and annual reviews.
- What does a draw cost? Is there a fee per drawdown, or only interest on the balance?
- How fast can I draw? Same day through an online portal, or by request with a delay?
- How is the limit reviewed? Annually, or whenever the lender chooses? Can it be reduced without notice?
- What’s the security? A director’s guarantee, a general security interest, or property?
- What happens if trading dips? Some facilities can be frozen if the account looks stressed — exactly when you’d want to use them.
The last question is the important one. A standby facility is only useful if it’s still there in a bad month. Lenders differ in how they handle this, so ask directly and get the answer in writing where you can.
A facility that costs slightly more but stays reliably available can be worth far more than a cheaper one that may disappear when you need it most.
Is standby funding worth it for a small business?
Often more so than for a large one. Smaller businesses usually have thinner cash buffers and fewer customers, so a single late payment or one slow month matters more. A modest facility, sized to cover one bad month, can be the difference between a calm week and a desperate one.
Set it up while the sun’s shining
If your business has had a few good months, now is the moment to arrange the buffer for the months that won’t be so kind. Enquiring involves no credit check, your details are handled by one team rather than distributed to lenders far and wide, and a real person helps you size the facility to your actual year. Please tell us your turnover, your pay cycle and the gaps you’re planning for — accurate details mean the right facility first time. Apply now.
Frequently asked questions
What is standby funding?
A facility you arrange in advance and only use when needed — usually a business line of credit. It's there for timing gaps like a late customer payment, a big BAS or a supplier deposit.
Does having an unused line of credit cost anything?
Some facilities charge a line fee or account fee whether or not you draw. Others charge only on what you use. Compare the cost of an unused limit before you decide how big it should be.
Will having a line of credit affect future borrowing?
Lenders consider existing limits when assessing new applications, even if they're unused. That's another reason to size a standby facility sensibly.
Can I use property as security for a standby facility?
Yes. A property-secured line of credit can support a larger limit and may cost less than an unsecured one. It takes a little longer to set up because the property needs valuing.
When is the best time to apply?
After a few strong months, well before a known crunch — for example, in October for the late-summer squeeze, or a month before a seasonal stock buy.
