Business loans - or business finance - covers the various types of funding available to SMEs. Whether it be from banks, non-bank lenders or specialist financiers in Australia, businesses can gain access to funding or purchase equipment to help grow their business through both unsecured and secured finance options.
Whilst you can get a business loan for any amount, the average is $30,000. The average term is between one and three years.
The main issue cited by business owners around business loans is a lack of clarity and information; their eligibility, how to apply, and who to apply with. Today, we’ll address these concerns and give you the information you need to make the best decision for your business and your future.
In this guide, you’ll learn:
Hover over your requirements on the left to see your available loan options
Fast access to vital cash flow
Buy essential equipment and stock
Buy and maintain vehicles
Pay unexpected bills such as tax bills
Hire new staff
Acquire new premises or upgrade and refurbish current premises
Buy or upgrade IT systems
Refinance credit card debt
Acquire a competitor
Build reputation and brand recognition through marketing and advertising
Build a website and establish a social network presence
Long-term business loans (loans of three years or more) are often used for financing major business purchases, such as vehicles, assets, and equipment, and will generally require security by the lender. Here’s what you need to know about long-term finance:
Long-term finance facilities tend to have lower interest rate – but the interest compounds, and you’ll end up paying more interest overall than on a loan you repay more quickly
Some long-term facilities have break penalties, which means you could pay substantial fees if you wish to terminate them early
Many long-term business finance facilities require security – your lender will have a legal interest in any assets you offer as collateral for a secured loan, so you will no longer be able to sell or replace them without getting approval, which could be a slow or complicated process
Business loans between 1 month and 3 years are often used by established businesses to cover sudden expenses - e.g. buying extra stock, paying a tax bill, or covering fluctuations in your revenue - and can be either secured or unsecured. We cover these types of loans in depth in our Guide to Short-term Business Finance.
Rates applied to your loan will vary, depending on a number of factors such as the type of finance you apply for, the lender, and much more. You can compare current rates and learn more about how lenders apply rates in our Business Loan Interest Rates guide. Alternatively, you can compare equipment finance interest rates here.
You can apply for a business loan with your bank, non-bank lenders, specialist finance lenders or by working with a finance broker. Finding the best lenders will depend on the type of loan you are applying for and the profile of your business.
If you’re seeking low-cost, long-term finance, and don’t need same-day approval, well-established businesses with assets to use as security may choose to speak to their bank about applying for a traditional business loan.
The majority of businesses seeking finance often can’t wait two or three weeks for approval. If you need fast approval on a business loan, or you don’t meet the strict criteria for approval through your bank, then your best option may be a non-bank lender or specialist finance lender.
If you are only wishing to finance a vehicle for your business, you may be offered business car finance direct from a dealership. Although this is often the most convenient option in this situation, you will likely get a better rate with lower fees by comparing business loan lenders first.
If you are like the majority of Australian business owners and don’t have the time to research the best business finance options available and compare lenders, you can speak to a business loan broker. A broker will be able to help you identify suitable lenders and compare products, in exchange for a small, one-time fee.
If you want fast approval on a business loan, you’ll be considering a specialist non-bank lender. These lenders will allow you to apply online, and many will offer same-day approval on an application.
When applying online, lenders will assess your application based on your personal credit profile and the strength of your business in a number of areas. To make a quick and accurate assessment, you’ll often have to provide your ABN and details about:
How the funds will increase revenue for your business
Financial projections for the business if approved for finance
Details of business expenditure and how you plan to successfully repay the loan
Lenders will use your bank statements to assess your level of risk as a borrower. It’s vital that your business bank statements are complete and unaltered. Lenders evaluate your business bank statements during the approval process to determine:
Your business revenue
Daily balance and monthly average
Your ability to service the loan based on business revenue
How much you can borrow
The frequency of deposits and size of your customer base
Any payments from the business to cover other debts or loans
Lenders need to review accurate and complete bank statements due to the risk in lending large amounts of money to small businesses. Access to your bank statements allows a lender to assess your ability to repay the full loan amount plus, and meet your regular repayment obligations.
A business applies for a loan amount which matches their monthly revenue
However, the business also spends a large portion of its profits servicing other loan amounts and to finance its employee’s personal expenses
While the business can afford the loan amount in relation to its monthly revenue, it cannot afford to meet the regular repayments due to high expenditure
The lender cannot justify approving the loan as the closing balance indicates an inability to service the loan amount
Business loan lenders allow you to apply online, and can automate the bank-statement analysis process, which enables them to provide faster approval, often within 24 hours.
The majority of businesses in Australia are classified as SMEs (Small-to-Medium-Sized Enterprises), and around 80% of SME owners will consider applying for finance during the lifetime of their business. Business loans in Australia are available from a wide selection of lenders and each type of loan will have its own unique purpose and benefits.
Do not require a deposit in most cases
Can be used to lease or rent assets and equipment
Can be obtained from banks for low interest rates
Can be obtained from online lenders for fast approval timeframes
The amount you can borrow with a business loan will depend on the revenue of your business, the type of loan you apply for, and the lender’s credit limits. The average is $30,000.
You can get same-day approval on many types of business finance by applying with non-bank or specialist finance lenders. If you apply for a business loan through a bank, the process may take a few weeks
You cannot get guaranteed approval on a business loan, however you can improve your chances of getting approved by making sure you provide all necessary supporting information and illustrate your ability to comfortably make repayments over time.
The best interest rates for a business loan are offered on secured forms of business finance and to companies with strong revenue and clear ability to repay the loan amount. Interest rates in Australia can be as low as 4.40% and as high as 40%.
Yes, you can get a business loan from many different non-bank lenders. The qualifying criteria with these lenders isn’t as strict as through major banks, and many will offer same-day approval on various forms of business finance. Non-bank lenders are increasingly popular with Australian SMEs needing fast access to business finance.