What is a business purpose declaration?

The short answer: a business purpose declaration is a short written statement, signed before a loan is entered into, that confirms the credit is for business or investment purposes rather than personal ones. It is what keeps a genuine business loan outside Australia’s consumer credit regime.

What a business purpose declaration is

A business purpose declaration is a written statement the borrower signs before the credit contract is entered into, confirming the credit will be used wholly or predominantly for business or investment purposes — other than investment in residential property. It is loan-specific and made up front, not after the fact. The declaration comes from section 13 of the National Credit Code, which is Schedule 1 to the National Consumer Credit Protection Act 2009, and it must be substantially in the form set out in regulation 68 of the NCCP Regulations. The form carries a plain warning on its face: by signing, the borrower accepts that the consumer protections of the Code may not apply to the loan.

What the declaration actually does

The National Credit Code is the consumer side of Australian lending — responsible-lending checks, financial-hardship rights, prescribed disclosure and the rest. Where those protections might be in play, the Code is presumed to apply, and the burden sits on the credit provider to show that it does not. A valid declaration reverses that presumption. It is treated as evidence that the credit is for business, so the consumer regime falls away and the loan runs on its commercial terms instead. For genuine business borrowing that is the correct, intended result; the Code was never built for it.

Do companies and trusts need to sign one?

This is the part that matters for most Lienhouse borrowers. The Code only reaches credit where the borrower is a natural person or a strata corporation. A Pty Ltd company, or a trust with a corporate trustee, is neither — so the consumer regime generally does not apply to them at all, whatever the purpose. On that basis, a company or trust borrowing for business does not strictly need a declaration to sit outside the Code.

In practice it is still part of a clean file. It confirms in writing what the structure already implies, and it covers the common situations where individuals are also on the deal: a director who guarantees the loan, or residential property owned personally and offered as security. Australian courts have looked through company-borrower arrangements where the company was inserted only to sidestep the Code, with no real business behind it. A true declaration, matched by a true business purpose, keeps the substance and the paperwork pointing the same way.

When a declaration won’t hold

A business purpose declaration is not a switch that turns the Code off on request. It is ineffective if the credit provider knew — or would have known after reasonable inquiries — that the money was really for personal, domestic or household use. Procuring a false declaration is an offence, not a loophole. The protection works precisely because the purpose is real: business borrowing, signed as business borrowing. Where the underlying purpose is genuinely commercial, the declaration is straightforward; where it is not, no form will fix that.

What it looks like on a Lienhouse file

For a company or trust raising capital against property for a business reason — clearing an ATO debt, bridging a settlement, releasing equity to fund a deal — the declaration is a routine, one-page confirmation rather than a hurdle. When your facility is structured, you sign it alongside the other loan documents, stating plainly that the credit is for business or investment purposes. Because the funding is arranged around business-purpose lending from the start, the declaration simply records what is already true about the deal. If it would help, we will walk you through exactly what you are signing before anything settles.