Quick answer
A credit policy is a lender's written rulebook for deciding who it will lend to, how much, on what security and on what conditions. It sets minimum trading time and turnover, acceptable industries, maximum loan-to-value ratios and how credit history is treated. Because every lender writes its own, an application that falls outside one lender's policy can sit comfortably inside another's.
Key points
- Each lender writes its own rules on trading time, turnover, security and credit history
- Banks must keep prudent credit policies under APRA's credit risk standard
- 'Outside policy' means a rule wasn't met, not that the business is bad
- Some loans are approved as policy exceptions when strong points offset the gap
When a loan officer says “I’d love to help, but it’s outside policy”, they’re pointing at a document you’ll probably never see. That document shapes almost every lending decision in Australia, and understanding it takes a lot of the sting out of a knock-back.
What sits inside a credit policy?
A credit policy turns a lender’s appetite for risk into rules its staff can apply consistently. Details vary, but most cover the same ground:
| Area | What the policy typically sets |
|---|---|
| Trading history | Minimum time the ABN has been active, often 6 months to 2 years |
| Turnover | A floor on annual or monthly revenue, see minimum turnover |
| Security | Acceptable property types and the maximum loan-to-value ratio for each |
| Credit history | Tolerance for defaults, court judgments and a cluster of recent enquiries |
| Industry | Sectors the lender favours, limits or won’t touch |
| Tax position | Whether ATO debt or late BAS lodgements are acceptable |
| Documents | Full financials, low doc or bank statements only |
| Authority | Who can approve what size of loan, and who signs off exceptions |
Banks don’t write these on a whim. APRA’s credit risk standard, APS 220, requires authorised deposit-taking institutions to keep prudent credit policies, and the board must approve the bank’s credit risk appetite at least once a year. APRA’s accompanying guidance also expects banks to monitor closely any loans approved outside policy. That discipline is a big part of why banks can offer the cheapest money.
Why one decline doesn’t close every door
Every lender draws its lines in a different place. A major bank might want two years of trading and full financials. A non-bank may take six months of bank statements. A private lender might focus almost entirely on the property and the exit strategy. None of them is wrong; each is pricing a different kind of risk.
So a decline usually means “not within our rules”, not “unlendable”. If your bank has said no, it’s worth asking which rule you didn’t meet, then finding a lender whose policy is built for that situation. Our declined by the bank page walks through the usual next steps.
Want a second opinion on a declined application? Send us a short enquiry and we’ll match it to a policy that fits.
Policy versus the credit decision
It helps to separate two stages. First, does the application fit the policy? Then a credit officer makes a judgement inside those rules, usually through a credit assessment and a risk grade. Sometimes an application that breaks a rule still gets approved as a policy exception, because something else, like strong security, makes up for it.
An example
A Wollongong electrical contractor with 15 months on its ABN applies to its bank for $120k to buy two vans and tooling. The bank’s policy requires two years of trading, so the request goes to a senior credit manager as an exception. With no property offered, it’s declined. The owner then applies to an equipment financier whose policy accepts 12 months of trading where the vans themselves secure the loan. It’s approved, with a higher total cost than the bank would have charged. (Illustrative only.)
Related terms
Lenders measure repayment capacity through serviceability. A non-bank lender typically runs broader policy than a bank. The bank vs non-bank lender comparison sets the trade-offs side by side.
Find the lender whose rules fit you
Knowing policies differ is useful. Knowing which one suits your numbers is more useful, and that’s what we do every day. It’s around sixty seconds to send an enquiry, and your credit file stays out of it while we take a look. Nor do we fire your application at dozens of lenders hoping one bites. A person on our team reviews your circumstances and calls to discuss which lender’s rules you’re most likely to meet. Accurate answers about trading time, turnover and any credit issues are what let us get that match right the first time.
Frequently asked questions
What does 'outside policy' mean?
It means the application breaks one or more of the lender's written rules, such as trading for less than the minimum period or wanting a higher loan-to-value ratio than allowed. It says nothing about whether the business is sound, only that it doesn't fit that lender's box.
Can I see a lender's credit policy?
Not in full. Lenders treat their detailed policy as confidential, although most publish headline criteria such as minimum trading time and turnover. A broker or lending specialist usually knows the practical rules from experience.
What is a policy exception?
An approval given even though the application breaks a rule, because other strengths make up for it. A bank might accept 18 months of trading instead of 24 if the owner has strong property security. Exceptions need sign-off from someone with higher authority.
Why do non-bank lenders approve loans that banks decline?
Their credit policies are built for different risks. They may accept shorter trading histories, past defaults or ATO debt, and price the loan to reflect that. That's why the total cost is usually higher.
Does credit policy change over time?
Yes. Lenders tighten or loosen policy as the economy, their funding costs and their loan book change. An industry a lender welcomed last year might now be restricted.