Credit & Eligibility · 7 min read
Can you get a business loan with a default on your file?
A default doesn't automatically disqualify you. How non-bank lenders weigh paid vs unpaid defaults, how long they stay on file, and what you can still borrow.
Short answer
Yes — a default on your credit file does not end the conversation. Banks are strict about it; the specialist lenders Avoir works with assess the whole picture: how old the default is, whether it's paid, how big it was, and above all how your business is trading right now. Non-bank and fintech lenders in Australia routinely approve businesses other lenders have knocked back, typically pricing somewhere in the 9–35% p.a. range to reflect the added risk.
Meeting a lender's criteria makes you eligible to apply — it doesn't guarantee approval.
What actually counts as a default
A payment default can be listed on your credit file when a debt of $100 or more has been overdue for 60+ days, the creditor has tried to collect, and the required notices have been sent. It then stays on your credit report for five years — even after you pay it. Paying doesn't remove the listing, but it does change the status to “paid,” which materially improves how a lender reads it. (Confirm current listing rules with the credit bureau, as they're set by the bureaus and by law.)
Life of a default listing
Day 0 — debt overdue
$100+ unpaid; creditor begins collection and sends the required notices
Day 60+ — default can be listed
The listing appears on your credit file and is visible to every lender that checks it
You pay — status changes to “paid”
The listing stays, but reads far better to a lender
Year 5 — listing drops off
Five years from the listing date, paid or not, the default leaves your file
What lenders weigh about a default
Paid vs unpaid
A cleared default is read very differently to one still outstanding. “Paid” status is the single easiest improvement you can make before applying.
Age
A default from three years ago carries far less weight than one from three months ago. It sits on file for five years, but its impact fades as it ages and as clean history builds on top.
Size and type
A $300 telco default is noise. A $40,000 default to a trade creditor is a different signal. Lenders also separate a commercial default from a personal one on the director's file.
Your current trading
This is the one that moves the decision. Six months of steady bank statements showing revenue that comfortably services the loan can outweigh an old default entirely. Cash-flow lenders read the statements first and the credit file second.
What you can realistically borrow
Unsecured, on cash flow
Achievable with an older or paid default and solid recent trading, through an unsecured facility. Expect a higher rate than a clean file would attract — often in that 9–35% p.a. band depending on the lender and your profile.
Secured or caveat finance
Where the default is recent, large, or unpaid, a lender may want property or a caveat to get comfortable — caveat or secured finance widens your options but raises the stakes if things go wrong.
A smaller facility to rebuild
Taking and cleanly repaying a modest bad-credit business loan is one of the faster ways to build positive history over a default.
How to give yourself the best shot
1. Know what's on your file
Pull your commercial credit report before you apply — no surprises, and you can correct anything listed in error.
2. Clear what you can
Even shifting a default to “paid” helps.
3. Lead with your bank statements
Recent, consistent revenue is your strongest argument.
4. Apply once, to the right lender
Scattered applications rack up hard enquiries that make the next lender warier. A specialist who knows which lenders are comfortable with defaults gets a cleaner result — Avoir does that matching on a soft check.
FAQ
Does a default mean automatic rejection?
No. Non-bank lenders assess the default's age, whether it's paid, the amount, and your current cash flow. Many businesses with a default are still eligible to apply.
Will paying a default help me get approved?
Usually. It won't erase the listing — a default stays on your file for five years — but 'paid' status meaningfully improves how lenders read it.
How long does a default stay on my credit file in Australia?
Five years from the date it was listed, for both commercial and consumer defaults, even once the amount is paid.
Can I get an unsecured loan with bad credit?
Sometimes, if recent trading is strong, typically at a higher rate. Otherwise a secured or caveat facility may be the path.
READY TO FIND OUT WHAT'S POSSIBLE?
Check your options — even with a default on file
Apply in two minutes. Soft credit check only — no impact on your score. A specialist will review your profile and let you know which lenders can work with your situation.
Apply now — it's freeSources
By James Baker · Founder, Avoir
Founder of Avoir and a commercial finance specialist focused on asset and equipment finance for Australian transport, civil and construction businesses.
Last reviewed: 24 July 2026
Listing rules and rate ranges are point-in-time as at the review date above; verify them before relying on them. General information only, not financial advice. Consider your circumstances and seek advice before acting. Avoir is not a lender or credit provider; all credit decisions are made independently by our lending partners.