What Most People Get Wrong
About Borrowing Money
Borrowing money for your business is not complicated in principle. You need funding, someone has it, and you reach an agreement about the terms. In practice, the space between principle and agreement is where most mistakes happen — and where most of the cost quietly accumulates.
A lot of business owners approach funding the way most people approach going to the doctor: they wait until something is definitely wrong before making the appointment. By that point, the options are narrower, the timeline is shorter, and the leverage is somewhere south of ideal. It's understandable — funding conversations feel like admissions of need, and nobody loves admitting they need something. But the businesses that borrow well tend to be the ones that borrow before they have to, when they have choices rather than when they're out of them.
Abel Prasad works with businesses across South Australia — and increasingly further afield — on exactly these decisions. The same business borrowing mistakes come up again and again, not because business owners are unsophisticated but because nobody teaches you this stuff in a useful way. So here it is, as plainly as possible.
The five most common borrowing mistakes
01
Treating all funding as the same thing
A line of credit, a term loan, invoice finance, private credit, and equity are not different flavours of the same product. They have different costs, different structures, different covenant profiles, and they suit different purposes. Using a short-term facility to fund a long-term asset is one of the most reliable ways to create a cash flow problem that didn't need to exist. Using an expensive private credit facility when a bank loan was available is just leaving money on the table.
The fix
Start with what the money is for and work backwards to the structure. The funding should match the purpose — in term, in cost, and in how it sits on your balance sheet.
02
Going to one lender and accepting whatever they offer
Australia's major banks are well-resourced, have good products for the right borrower, and charge less than most alternatives. They are also not always the right lender for your situation, and their standard terms are their standard terms — negotiated not at all, or not enough, by most borrowers. The private credit and non-bank lending market in South Australia and nationally has expanded significantly, which means there is now genuine competition that most borrowers never use.
The fix
Get more than one term sheet. The second offer changes what's possible on the first. If you can't face the process, find an adviser who can run it for you — the cost of good advice is almost always less than the cost of a suboptimal facility over its full term.
03
Focusing on the interest rate and ignoring everything else
The rate is the number on the label. The cost of the loan is the total of the rate, the fees, the covenants, the reporting requirements, the establishment costs, and the cost of whatever flexibility you give up. A loan at 6.5% with tight covenants and monthly reporting requirements can be more expensive, in real terms, than a loan at 8% that leaves you free to run your business. Most borrowers never read the covenants closely enough to know what they've agreed to until the moment it matters.
The fix
Read the covenants. All of them. Before you sign. Ask your lawyer or adviser which ones are negotiable — more are than lenders tend to suggest.
04
Borrowing reactively rather than strategically
The businesses that access the best funding terms are the ones that approach lenders from a position of strength — with clean financials, a clear purpose for the capital, and time on their side. The businesses that pay the most for funding are the ones that need it urgently, whose books are harder to read, and whose window for decision-making is measured in weeks rather than months. The difference in outcome between these two situations is substantial, and it is almost entirely determined by when the conversation starts.
The fix
Have funding conversations six months before you need the money, not six weeks. Lenders are more generous to borrowers who don't need them yet.
05
Not knowing your own credit story
Lenders will form a view of your business before you finish your first sentence. That view is based on your financials, your credit history, your industry, your structure, and the quality of the information you provide. Many borrowers arrive at lender conversations without a clear narrative about their own business — why the numbers look the way they do, what the growth trajectory is, why now is the right time to borrow. A lender filling in the blanks themselves will not fill them in charitably.
The fix
Know your numbers cold. Prepare a clear, concise picture of your business — the good and the complicated. Lenders who understand a business well enough to believe in it lend on better terms than lenders who are doing their own risk assessment in the dark.
The businesses that borrow well — on the right terms, at the right time, from the right sources — do not have some special relationship with lenders. They have better information, better preparation, and they ask better questions. Those are all learnable things.
The funding landscape in Australia, and particularly across South Australia and Adelaide, has changed significantly over the past decade. There are more options than there used to be, which is genuinely good news for borrowers. But more options without more clarity about what you need tends to produce the same mistakes as fewer options — just with a wider menu to make them from. The best starting point is always the same: be clear about what you need, why you need it, and what a good outcome actually looks like. The rest follows from there.
The businesses that borrow well tend to be the ones that borrow before they have to, when they have choices rather than when they're out of them. Preparation is the cheapest form of leverage available to any borrower.
Frequently asked questions
What are the most common mistakes businesses make when borrowing money?
The five most common mistakes are: treating all funding types as interchangeable when they have fundamentally different structures and costs; accepting the first offer from a single lender rather than creating competition; focusing only on interest rates while ignoring covenants and total cost of facility; borrowing reactively when under pressure rather than strategically when options are open; and approaching lenders without a clear, well-prepared narrative about the business. Each of these mistakes is avoidable with preparation and advice.
How far in advance should I approach lenders for business funding?
Ideally six months before you need the money — and certainly no later than three months. Lenders are more generous, more flexible, and more willing to negotiate terms with borrowers who are not under time pressure. Approaching lenders reactively — when you urgently need funding — significantly reduces your negotiating position, compresses decision timelines, and often results in higher-cost, less flexible facilities than you would have accessed with more lead time.
Should I use a finance broker when borrowing for my business?
For most mid-market business borrowing, yes — particularly when accessing non-bank lenders or navigating a complex funding requirement. A broker who knows the South Australian and national lending market can identify which lenders are currently active in your sector, prepare your application in a way that suits each lender's criteria, and create the competitive tension between multiple offers that produces better terms. The cost of good advice is almost always less than the cost of a suboptimal facility over its term. For straightforward bank facilities from existing banking relationships, the calculus is more situational.
What should I prepare before approaching a lender for a business loan?
At minimum: two to three years of financial statements and tax returns, current management accounts, a clear statement of what the funding is for and how it will be repaid, an understanding of what security you can offer, and a concise narrative about your business that explains the numbers rather than just presenting them. Businesses that arrive at lender conversations with clean, well-organised information and a clear story about their business consistently achieve better outcomes than those that present raw data and expect the lender to interpret it favourably.
Ready to borrow better?
Abel Prasad works with South Australian business owners to prepare for funding conversations, compare options, and negotiate terms — before they need to, when it matters most.
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