Applying for a credit license

Now that you've developed and implemented your credit policy, you can start to apply for a credit license through the Australian Securities & Investments Commission. Here are some of the things you should be aware of before you commence your online application.

Determine if you need a credit license

Many small business owners assume that if they extend credit to customers, they must need a license, which is true in most cases, but there are also a few exceptions. According to ASIC, if your business provides activities related to a credit contract or consumer lease, such as directly providing credit, making related suggestions or acting as an intermediary between a lender and consumer (or a between a lessor and a consumer with regards to a consumer lease), then you will need a license.

You do not need a licence if you are an authorised credit representative, exempt under the National Credit Act or are an employee or director of a licensed credit provider (or its subsidiary). The National Credit Act exempts specific professions, such as lawyers, insolvency practitioners, registered tax agent, point-of-sale retailer, financial counselling agency or state-licensed debt collectors, among others. Check the ASIC website for further information.

Select the appropriate authorisations

Once you have decided you do need a credit license, you will need to select either an Australian Financial Services (AFS) license or a regular credit license. The former is needed if you provide financial product advice, or deal in a financial product such as a loan or credit cards. These are the two most commonly provided services, although other services can also include operating a registered scheme and providing a custodial or depository service.

On the other hand, a credit license covers all other credit activities that are broken into three categories:

  • Credit provider
  • Credit representative or broker
  • All of the above

ASIC recommends that you pick only the category that suits your business model. If you just want to act as a mortgage broker, for example, you shouldn't need to pick the last option, as your application success rate would also depend on your ability to provide credit as well as broking services.

Provide a criminal history check

In most cases, you will need to provide a criminal history check, either for yourself, your company's directors/managers, or partners/trustees. Ask yourself the question, will this person be performing credit-related activities? If the answer is yes, you will need to provide a criminal history check for him/her. You can get them from the Australian Federal Police, state police, or CrimTrac-accredited brokers. 

Ensure that the criminal and bankruptcy checks are less than 12 months old. You may also need to provide a credit history report, which cannot be more than three months old.

Ensure you have sufficient finances

Ensure that you have enough funds to pay for the license, which ranges from $465 to $21,700 depending on how much credit your business refers/provides per year. For example, if you are a micro-lender with just one credit representative (a sole trader) and advanced $3 million worth of credit, the fee is $465 for an online lodgement. A paper lodgement will cost you $116 more. A new startup business will generally pay $465.


In contrast, if you are a finance company that advanced $1 billion in credit, and also received rent from leases of $200 million, you will have to pay $12,400 in credit fees.  For more information, see the ASIC information sheet >>

Bear in mind that you may also need to lodge an annual compliance certificate.

You may also need funds to train your staff - credit representatives of a business engaged in direct lending must have a Certificate IV in Financial Services, for example.

Lastly, but most importantly, you will also need to make sure you have enough money to sustain your business while extending credit, as this means that cash owed to you will be delayed. It's essential to calculate all your expenses and earnings to make sure you can meet your own debts as well. In addition, you will need to plan and monitor cash flows, and keep records of your financial resources as requirements of a credit licensee.

If you are experiencing problems managing your cash flow due to bad debts, consider engaging a debt collection service at the last resort, such as D&B Collect. This service is tailored to SMEs and delivers an outcome in 21 days, allowing you to focus on your core business and not on recovering outstanding debts.

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