Funded Debt in Australia: 2025 Trends, Policy Changes & Business Impact

In 2025, the role of funded debt is under the spotlight as Australian businesses navigate a changing financial landscape. With interest rates stabilising and new regulatory tweaks, understanding long-term borrowing is more crucial than ever for strategic growth.

What Is Funded Debt and Why Does It Matter in 2025?

Funded debt refers to long-term borrowing, typically with maturities greater than one year, that companies use to finance operations, expansions, or major capital projects. Unlike short-term liabilities, funded debt provides a stable capital base—but comes with its own risks and rewards.

In Australia, funded debt includes bank loans, corporate bonds, and debentures that mature over multiple years. The appeal? Predictable repayment schedules and generally lower interest rates compared to short-term credit, especially as the Reserve Bank of Australia (RBA) has signalled a hold on rates after a turbulent 2022–2024 period.

• Stability: Locks in capital at current rates, shielding businesses from short-term rate hikes.

• Strategic Leverage: Enables major investments—think infrastructure, tech upgrades, or acquisitions.

• Creditworthiness: Well-managed funded debt can improve a company’s profile with lenders and investors.

2025 Policy Updates: What’s Changed for Funded Debt?

This year, several regulatory shifts are reshaping how funded debt works for Australian companies:

• APRA’s New Reporting Standards: The Australian Prudential Regulation Authority introduced tighter disclosure requirements for long-term liabilities, making it easier for investors to assess corporate risk.

• Green Bond Incentives: The federal government expanded tax incentives for green-funded debt instruments, supporting climate-aligned infrastructure and energy projects.

• SME Access Initiatives: In response to persistent small business credit constraints, the Australian Business Securitisation Fund (ABSF) increased its support for non-bank lenders offering multi-year loans to SMEs.

These changes reflect a broader push to ensure transparency and foster sustainable economic growth through responsible leverage.

Real-World Examples: Funded Debt in Action

How are Australian businesses putting funded debt to work in 2025?

• Infrastructure Giants: Companies like Transurban and Sydney Airport are issuing multi-billion-dollar bonds to refinance maturing debt and invest in smart infrastructure, locking in rates before future market uncertainty.

• Mid-Sized Tech Firms: With the RBA’s rate hold, several ASX-listed tech companies are using funded debt to finance R&D and overseas expansion. For example, Atlassian’s latest bond issue supports a new data centre in Victoria, underpinned by green bond incentives.

• Small Business Growth: SMEs are increasingly accessing funded debt through non-bank lenders, leveraging the ABSF program to secure three-to-five-year loans for equipment upgrades and digital transformation.

In each case, the strategic use of long-term borrowing allows companies to focus on growth without the distraction of short-term refinancing risk.

Managing the Risks: What to Watch Out For

Funded debt is not without pitfalls. Companies must balance the benefits against potential downsides:

• Interest Rate Risk: While rates are stable now, future increases could impact new debt issues or refinancing costs.

• Covenant Constraints: Lenders are tightening loan covenants, especially for leveraged sectors, so businesses must monitor compliance closely.

• Debt Overhang: Excessive funded debt can limit strategic flexibility and strain cash flows during downturns.

Smart businesses are stress-testing their balance sheets and considering hybrid instruments—like convertible bonds or sustainability-linked loans—to stay agile.

Key Takeaways for Australian Businesses

In 2025, funded debt remains a powerful tool for growth and resilience. With new policy supports and a more transparent regulatory environment, businesses that plan carefully can turn long-term borrowing into a competitive edge.