Banking Code of Practice 2025: what changed for small business borrowers

The Banking Code of Practice is the Australian Banking Association’s rule book for the banks that sign up to it, setting out how they will treat individual and small business customers. The current version, approved by ASIC on 27 June 2024, took effect on 28 February 2025. For business borrowers its headline change is reach: far more businesses now count as “small” and get the Code’s protections.

The Code is not a lending manual and doesn’t decide whether you get approved. What it does is set the minimum standard of conduct you can expect from a subscribing bank before, during and at the end of a loan. Knowing those standards helps you compare a bank offer fairly with one from a lender the Code doesn’t cover.

Who counts as a small business under the 2025 Code?

A business that meets all three tests:

Test	2025 Code threshold	What changed
Total borrowing	Under $5 million	Raised from $3 million
Annual turnover	Under $10 million	Unchanged
Staff	Fewer than 100 full-time equivalents	Unchanged

Turnover and staff are assessed across the business group where one applies, so related entities count. ASIC estimated the higher borrowing limit would bring around 10,000 more businesses under the Code. In practice that pulls in a lot of established property-owning operators, multi-site trades and professional practices whose combined debt sat between $3 million and $5 million, exactly the businesses most likely to have guarantors and property security on the line.

What does a bank commit to when you apply?

Five commitments matter most at the application stage:

1. Prudent assessment. When considering a new loan or a limit increase, the bank will exercise the care and skill of a diligent and prudent banker, looking at your financial position, account conduct and, where relevant, projected cash flow.
2. No outsourced certification. The bank won’t ask a third party, such as your accountant, to certify that you can repay. Your accountant prepares the numbers; the bank does the credit judgement.
3. Plain-English key terms. Before you accept, you get a document setting out the key general terms and conditions in plain English.
4. A reason if you’re declined. If the bank won’t approve the loan, it will tell you the general reason why, unless it is reasonable not to.
5. Your valuation. Where you’ve paid for a valuation of commercial or agricultural property, the bank will give you a copy of it and the valuer’s instructions (except once enforcement has started).

That fourth point is underused. A general decline reason is valuable information for your next application, whether you go back to a bank or move to a non-bank lender. Our guide to why lenders say no explains how to read one.

What happens if you miss a payment or breach a term?

The 2025 Code limits how quickly and on what grounds a subscribing bank can act against a small business:

• Missed payments: at least 30 days’ notice of the payment failure before the bank demands full repayment.
• Other defaults: where a non-monetary default can be fixed, generally at least 30 days’ notice to remedy it.
• Materiality: the bank will only act on a specific default event if it is material by nature, or reasonably considered to materially affect your ability to meet obligations or the bank’s security.
• No vague triggers: the bank won’t include a default event based on unspecified “material adverse change”.

These rules don’t cancel the debt or stop enforcement. They buy time to fix, refinance or sell in an orderly way. If you’re already behind, our page on missed business loan repayments sets out the practical sequence.

What notice do you get if a bank won’t renew a facility?

At least three months, if you are not in default. Where a loan’s principal isn’t designed to be fully repaid by the end of the term, such as an interest-only facility or one with a balloon, the bank commits to telling you of a decision not to extend it at least three months before you need to repay.

Three months is enough to refinance a well-documented loan. It is tight for a large property-secured facility with a valuation and legal work to complete, so treat any review letter as the start of a refinance timeline, not the end.

Facing a facility review, or a bank that has gone quiet on a renewal? Get a refinance option lined up early — enquiring doesn’t involve a credit check.

What changed for guarantors?

Guarantors gained the most practical protection. The ABA described a new obligation for banks to meet customers intending to act as guarantor before accepting the guarantee. Under the 2025 Code, subscribing banks commit to:

• Meet the prospective guarantor in person, by video, phone or other means, taking reasonable steps to ensure the borrower isn’t present.
• Provide key information, including the proposed loan contract, related security contracts, financial statements the borrower has given the bank and the latest account statement.
• Recommend independent advice prominently in the guarantee documents.
• Wait until the third day after giving that information before accepting the guarantee, unless the guarantor confirms they have had independent legal advice.
• Limit the guarantee to a specific amount, or to the value of specified property or assets.
• Keep the guarantor informed, sending a copy of any formal demand or default notice given to the borrower within 14 days.
• Allow withdrawal before credit is first provided, or afterwards if the signed loan differs materially from the one proposed.

If you are asking a spouse, parent or business partner to guarantee your loan, this changes the conversation. Build the meeting and waiting period into your timeline. Our explainer on director’s guarantees covers how guarantees work beyond the banks.

What help is there in financial difficulty?

Contact the bank early. The Code asks customers in financial difficulty, or who expect to miss upcoming repayments, to get in touch as soon as possible, and commits the bank to work with a cooperative customer toward a sustainable solution. The ABA said the 2025 version gives greater clarity on the financial difficulty options available to small businesses.

Where do complaints go?

First to the bank’s internal process, which must follow ASIC’s dispute resolution standard. If it isn’t resolved within 30 days, the bank must explain the delay and give you AFCA’s details. AFCA handles complaints from small businesses with fewer than 100 employees free of charge, but it can’t consider a complaint about a small business credit facility over $5 million.

Does the Code cover non-bank lenders?

No, and that is the most important limit to understand. The Code binds only the banks that subscribe to it. ASIC’s guidance on commercial loan disputes ranks business lending at the bottom of the legal protection ladder. A lender that writes nothing but commercial credit can operate without a credit licence, and AFCA membership is optional for it.

Protection	Subscribing bank, small business customer	Non-bank or private lender
Plain-English key terms	Code commitment	Depends on the lender
30 days’ notice before demand for a missed payment	Code commitment	As set out in the contract
Limited guarantees and guarantor meeting	Code commitment	As set out in the contract
AFCA access	Yes, within AFCA’s limits	Only if the lender is an AFCA member
Unfair contract terms law	Applies to standard form small business contracts	Applies to standard form small business contracts

That doesn’t make non-banks a poor choice. They fund many of the files banks won’t, often faster. It means you should read the default, guarantee and review clauses in a non-bank contract as carefully as the price. Our lender directory explains how each lender type works. Before signing with anyone, check the lender is legitimate.

An illustrative example

Illustrative only — not a real business or lender.

A family-owned engineering firm with 40 staff owes $4.2 million across a bank commercial property loan, equipment finance and an overdraft. Before 28 February 2025 it sat above the old $3 million borrowing limit and fell outside the Code’s small business protections. Under the 2025 Code it is inside them. When its bank reviews the overdraft and signals it won’t renew an interest-only facility, the firm receives at least three months’ notice, and the owner’s sister, who is asked to guarantee a replacement facility, gets her own meeting, documents and waiting period. The firm uses that window to get a refinance quote from a second lender and compare the terms clause by clause.

How do you use the Code in practice?

1. Check your status. Total your borrowing across all lenders and related entities, and confirm turnover and FTE numbers.
2. Ask whether the lender subscribes to the Banking Code before you apply.
3. Request the plain-English terms summary and read the default and review clauses.
4. Ask for the decline reason if you’re turned down.
5. Diarise review and expiry dates at least six months out.
6. Brief any guarantor early so the meeting and waiting period don’t delay settlement.

Want a lender lined up before the bank’s deadline?

Whether you’re inside the Code’s protections or dealing with a lender outside them, the strongest position is having a second option ready. Send a quick enquiry and we’ll match you with the bank or non-bank lender types that suit your security and trading. There’s no credit check to start, your details stay with the specialist handling them rather than being shopped around, and a real person reads the file. Give us your actual borrowing totals and review dates so the first match is the right one.