Will Your Working Capital Facility Kill Your Home Loan Borrowing Power?

If you run a business, your working capital facilities almost always reduce your borrowing power for a home or investment loan, because lenders assess them as ongoing debts and load them with APRA’s 3% serviceability buffer. The bigger and messier your overdrafts, lines of credit and short‑term loans look, the more they cut what you can borrow – even if your business is profitable.

In this guide, we’ll unpack how banks actually treat these facilities, how much capacity you can lose, and what to change this month so your business funding doesn’t kill your next property deal.

Working capital facilities directly influence how lenders calculate your borrowing power.

1. How lenders see your working capital – not how you see it

1.1 Common SME working capital facilities

Typical day‑to‑day facilities lenders look at:

• Business overdrafts (secured or unsecured)
• Business lines of credit
• Trade finance / debtor finance
• Short‑term working capital loans (3–36 months)
• Corporate cards and business credit cards

From a lender’s perspective, these are all debts first, cashflow tools second. Even if you “clear the overdraft every few months”, they assess the limit and repayment as if it will stick around for the life of your home loan.

For a refresher on how these facilities work and safe limits, see Working Capital Basics: Structures, Costs And Safe Limits For SMEs.

1.2 Key serviceability rules that bite business owners

Most banks apply three core rules:

1. APRA buffer: All debts are assessed at an interest rate at least 3% higher than the actual rate.
2. Limit-based assessments: Overdrafts and cards are often tested on the full limit, not your usual balance.
3. Short terms = high assessed repayments: A 3‑year working capital loan can produce a huge “assessed” monthly repayment compared to a 25‑ or 30‑year home loan.

Combined, these can slash your borrowing power, even when your business is comfortably meeting its commitments.

2. How much borrowing power can you lose?

2.1 Comparison: same income, different working capital

Assume a self‑employed borrower with:

• Combined taxable income: $180,000
• Minimal personal debt
• Seeking an owner‑occupier P&I home loan over 30 years

Indicative impact of different working capital setups:

*Illustrative only – not a quote or guarantee. Each lender’s calculator differs.

The lesson: structure and limits matter as much as interest rate.

2.2 Worked example: overdraft vs term loan

Say your business has a $120,000 overdraft at 11% p.a., usually sitting around $40,000.

• Many home loan lenders will assess the full $120,000, not the $40,000.
• Using a typical policy, they might load in an assessed repayment of ~$3,000–$3,500 per month, even though you only pay interest on usage.

If instead you:

• Reduce the overdraft limit to $60,000, and
• Move $60,000 into a 5‑year business term loan at, say, 9% p.a.

Then serviceability might look like:

• Overdraft: assessed at ~$1,500–$1,800 per month
• Term loan: assessed at ~$1,250–$1,350 per month

Total assessed commitment: maybe $2,700–$3,100 instead of $3,000–$3,500+ – and often better again once you factor in different lender treatment.

This can easily increase your home loan capacity by $50,000–$150,000, depending on the lender and your income mix.

For a deeper dive on why stretching terms can sometimes increase capacity, see How Longer Business Loan Terms Can Protect Your Next Home Loan.

Aligning business cashflow structures with lending rules can protect your borrowing power.