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Business Loan Interest Rates

Lowest business loan interest rates in Australia

The lowest business loan interest rates will be applied to business loans secured against property, and where the asset being financed will be used as security. Rates start from around 4%. For business finance where no security is offered, rates start from around 10%. 

A secured loan reduces the level of risk presented to a lender when approving your application for finance, and reduced risk as a borrower will result in lower interest rates on a business loan.

Compare business loan interest rates

type of business loanlowest fixed interest rates
Unsecured Business LoansFrom 12.00%
Small Business LoansFrom 5.00%
Business Line of CreditFrom 5.00%
Business OverdraftFrom 14.95%
Equipment FinanceFrom 4.49%
Business Credit CardFrom 12.10%
Invoice FinanceFrom 1.5%
Traditional Bank LoanFrom 4.05%
Personal LoanFrom 6.99%
Fit-Out FinanceFrom 7.49%
Bad Credit Business LoanFrom 15.00%

How lenders apply interest to business loans

Lenders assess your loan application on your ability to repay the loan amount and the amount of risk you present as a borrower. If you have a clean credit score, a successful business, and are borrowing a reasonable amount of money, you will present a low level of risk. If you have a poor credit score, a struggling business, and are borrowing a very large amount of money, you will present a higher level risk. 

Not every applicant fits into these two extreme examples, however, so understanding the individual factors which influence the level of risk you present to a borrower will assist you in securing a business loan with the lowest interest rates possible for your situation. 

Factors that influence business loan interest rates can include:

  • Type of business finance you are applying for 
  • Term of your business loan 
  • Amount of money you are borrowing 
  • Value of the collateral - if any - you are providing as security 
  • Age of your business 
  • Trading history of your business 
  • The lender you are applying with 
  • Type of interest - i.e. Fixed or Variable-rate interest 

How to get the lowest interest rates on a business loan

You can access the lowest interest rates on business loans by considering each of the assessment factors and ensuring you present as little risk as possible in each of them. Below is a guide on how to identify risk in your application to ensure you qualify for the lowest business loan interest rates.

Risk Assessment Factors

Risk FactorLower RiskHigher Risk
CollateralSecured with propertyNo security
GuarantorsLow-risk guarantorNo guarantor
Business HistoryEstablished business with steady profits and stable customer and client relationshipNew business or seasonal business with fluctuating profits or a very small pool of clients
Borrower ProfileClean Credit History and established history of repaying any previous loansDefaults, Part IX or Bankruptcy
Type of Business LoanSecured loans used to purchase reclaimable assetsCash loans and unreclaimable asset loans
Use for the loanFinance business vehicles or high-value, long-life assetsRepay business debts

How to choose a business loan with low interest

A low interest rate is a good indicator of the total cost you will pay on a business loan over the term - however, it’s not the only factor that will influence the true cost of a loan. To ensure payments are kept to a minimum over the entire term of the loan, you will need to consider other factors that can affect the total cost of the loan to your business, including:

  • Approval Speed 
  • Loan establishment fees 
  • Monthly or annual fees 
  • Late-payment penalties 
  • Early repayment penalties 
  • Variable or Fixed-Rate Interest 

Approval speed on a business loan is often just as important to borrowers as the interest rate. Access to cash for your business today can allow you to make crucial business decisions and potentially repay the loan amount much earlier than the end of the established term. 

Fast approval on a business loan can provide borrowers with access to cash flow within 24 hour - in many cases, borrowers will consider approval speed and no penalties for early repayment as the most important factors when applying.

Is Fixed-Rate Interest or Variable Interest better for a business loan?

Business loans are offered with either fixed or variable interest rates, and each type of business loan interest has its own pros and cons:

  • Fixed-Rate Interest - A fixed rate will stay the same for the entire term of the business loan. A fixed rate indicates that whether interest rates rise or fall, you will still pay the initial agreed amount of interest. Often these business loans may include early-payment penalties. 
  • Variable-Rate Interest - A variable rate is subject to change across the term of the business loan. If interest rates fall, you may be in a better position than when you initially agreed to the loan. If interest rates rise, however, you will be obligated to pay a higher rate of interest.  

Fixed-rate interest on business loans will allow you to accurately project the true cost of the loan over the term. If you are considering a business loan with a variable interest rate, it’s important that you first assess your ability to meet loan repayments should the interest rates increase over time.

Business Loan Interest Rates Summary

Business loan interest rates are assessed by lenders according to the level of risk a borrower presents. The lowest rates are offered to high-performing, stable businesses with a clean credit history, and are secured with collateral. 

In summary:

  • Start from around 4% for secured business loans 
  • Start from around 10% for unsecured business loans 
  • Are often lower when the loan is provided by a bank 
  • Are higher from business loan lenders, who offer faster approval in return 
  • Can be either fixed or variable 
  • Are determined by your borrower profile and borrowing history 

Business Loan Interest Rates FAQ

What is the interest rate for business loans?

Interest rates vary from lender to lender and between the various business loan products available in Australia. In general, secured business loans will start from around 4%, and unsecured business loans start from around 10%.

Who offers the best business loan interest rates?

Different lenders will offer different rates. Banks will often provide the lowest interest rates, but have strict approval criteria. Borrowers may often choose slightly higher interest rates from business loan lenders due to the faster approval time offered by these lenders.

Why do unsecured business loans have higher interest rates?

Unsecured business loans often have higher interest rates than secured business loans due to the lack of collateral used on the loan and subsequently higher risk to the lender. However, unsecured business loans can provide fast finance to small businesses with limited security to offer a lender.

How do I compare business loan interest rates?

To compare business loan interest rates, you can look at the type of business loan you wish to apply for, the lenders who offer them, and their qualifying criteria. You will then need to factor in any fees and penalties associated with the loan, and whether the interest rate is fixed or variable.