Australian finance is full of jargon, but few terms are as intriguing—or as misunderstood—as the ‘kicker.’ Whether you’re eyeing a business loan, investing in property, or considering a convertible note, understanding what a kicker is (and how it works) could make a real difference to your financial outcome in 2025.

What Is a ‘Kicker’ in Finance?

A ‘kicker’ is a financial sweetener: an added incentive in a loan or investment deal that can deliver extra value to one of the parties, usually the lender or investor. In simple terms, it’s a bonus clause that ‘kicks in’ under certain conditions, enhancing the return or reducing risk. Kickers are common in commercial lending, private equity, and structured finance. They’re becoming increasingly relevant in Australia’s dynamic 2025 market, where lenders and investors are looking for ways to balance risk and reward amid changing economic conditions.

How Do Kickers Work in the Australian Context?

Kickers can take various forms, but here are the most common in Australian finance:

Equity Kickers: The lender receives a portion of equity (shares or options) in addition to regular loan repayments, often used in startup or property development loans.
Performance Kickers: The lender or investor gets an extra return if the borrower achieves specific targets—like revenue milestones or property sales.
Profit Participation: In some commercial loans, lenders may get a share of profits if the project exceeds certain thresholds.

For example, a 2025 Melbourne property developer might secure a mezzanine loan with a 10% interest rate and a kicker that gives the lender 5% of profits if the project sells above a certain price. In startup finance, convertible notes often include kickers, allowing investors to convert debt to equity at a discount if the business raises more capital.

Why Are Kickers Popular in 2025?

Several trends are driving the use of kickers in Australia this year:

Higher Interest Rates: With the RBA’s cash rate holding steady above 4% in early 2025, borrowers and lenders are negotiating more flexible terms—including kickers to make deals work.
Tighter Credit Conditions: As banks tighten lending criteria, alternative lenders use kickers to compete and align their interests with borrowers.
Increased Private Capital Activity: Private credit funds and non-bank lenders, now a $70+ billion market, are using kickers to attract both investors and borrowers in a competitive landscape.

Kickers help bridge the gap between what borrowers can afford and what lenders or investors expect in return. They also align incentives: if the project succeeds, both parties win.

What Should Borrowers and Investors Watch Out For?

Kickers can be a win-win—but only if you understand the details. Here’s what to look out for in 2025:

Triggers and Conditions: Know exactly when the kicker activates. Is it based on profits, a future sale, or a refinancing event?
Valuation Methods: In equity kickers, how is the equity valued? Who decides, and when?
Tax Implications: The ATO treats profit participation and equity differently, so professional advice is crucial.
Disclosure and Transparency: ASIC has tightened rules on loan and investment disclosures, so all kicker clauses must be clearly documented.

Real-world example: An Australian agtech startup in 2025 raises $2 million via convertible notes with a 15% kicker, giving noteholders a 15% discount on shares at the next funding round. If the company takes off, early investors get a bigger slice of the pie—rewarding their early risk.

The Bottom Line: Are Kickers Right for You?

Kickers are not just for the big end of town—they’re popping up in SME finance, property loans, and private investments all over Australia. They can help close deals, balance risk, and create upside for everyone involved. But as with any financial sweetener, the devil is in the detail. If you’re considering a loan or investment with a kicker in 2025, make sure you know exactly what you’re signing up for—and how it could impact your future returns or obligations.