With Discretion: Flexible Finance Strategies for 2025

Australian investors are sharpening their focus on flexibility in 2025, and the phrase ‘with discretion’ is more than just legal jargon—it’s a strategic lever. As markets face persistent volatility and lenders tighten requirements, understanding how discretion clauses work in finance agreements is key to unlocking opportunities and managing risk.

What Does ‘With Discretion’ Mean in Finance?

In the Australian financial landscape, ‘with discretion’ typically refers to contractual terms that give one party—usually a lender or financier—the authority to make decisions or grant exceptions on a case-by-case basis. This might include approving loan redraws, varying repayment schedules, or allowing early settlements. While it might sound like a one-sided advantage, these clauses can work in your favour if you understand how to leverage them.

For example, a business loan may state that additional funding is available ‘with discretion of the lender.’ This means your access to extra capital isn’t automatic, but it can be negotiated—particularly if your business performance is strong or you can demonstrate a clear benefit to the financier. In 2025, as banks and non-bank lenders alike place a premium on risk management, these clauses are showing up more often in everything from equipment finance to SME working capital facilities.

Real-World Scenarios: How Discretion Offers Flexibility

• Asset Finance: Many asset finance agreements in 2025 allow for balloon payment adjustments or end-of-term purchase options ‘with discretion.’ For example, an agricultural business leasing harvesting equipment may request an extension to the lease due to a delayed crop cycle. With a discretion clause, the lender can approve this on a case-by-case basis—potentially saving the business from forced asset sales or penalty fees.
• Property Lending: Discretionary redraws are common in mortgage products, especially for investors. If you’ve made extra repayments and want to access those funds for a renovation or new investment, the lender’s discretion determines if and when you can redraw. In 2025, with property markets stabilising but rates remaining high, banks are using these clauses to balance customer retention with prudent risk controls.
• Business Credit: For SMEs, revolving credit facilities often include ‘with discretion’ clauses around credit limit increases. If your business booms unexpectedly, a lender might approve a higher limit based on updated financials—again, at their discretion.

2025 Policy Landscape: What’s Changing?

Regulatory attention is turning to transparency in discretionary lending. The Australian Securities and Investments Commission (ASIC) updated its guidance in late 2024, pushing lenders to clearly outline the circumstances under which discretion will be exercised. This is designed to prevent arbitrary decisions and improve fairness for borrowers.

Major banks have responded by publishing internal criteria for discretionary approvals, such as minimum credit scores, up-to-date financials, or industry risk ratings. Non-bank lenders, meanwhile, are using discretion as a point of difference, offering more personal assessment—particularly to SMEs and self-employed borrowers who may not tick every box on a standard application.

For investors and business owners, this means:

• Greater transparency around when and how you can access flexible finance features.
• More negotiation power—if you can present a strong business case.
• Potential for tailored solutions, but also a need to read the fine print and understand your financier’s criteria.

Making Discretion Work for You: Tips for 2025

To turn ‘with discretion’ from a risk into an advantage:

1. Build a strong relationship with your lender. Direct communication and proactive updates on your financial position can make it easier to secure positive discretionary decisions.
2. Document your case. Whether seeking a redraw, repayment holiday, or credit increase, have your numbers and rationale ready.
3. Know your alternatives. If your lender declines, a transparent policy environment in 2025 means you can benchmark their offer—and potentially negotiate with competitors.

As the finance sector continues to adapt, those who understand and strategically use discretion clauses will be best placed to capitalise on both opportunities and challenges.