Business Loans

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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 business loan is $30,000. The average business loan term is between one and three years.

The problem for business owners needing to access funding


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 our business loans guide, you’ll learn:

  • The types of business loans available
  • What they are most commonly used for
  • How to choose the best business loan for your needs
  • How each type of business finance works
  • The pros and cons of each
  • Where to apply for a loan and what you’ll need to qualify
  • How lenders assess business finance applications
  • How to compare interest rates, terms and fees

Top 11 Business Loans in Australia in 2019


Here is an overview of the most popular types of business finance in Australia.

  • Invoice Finance
  • Merchant Cash Advance
  • Trade Finance
  • Traditional Bank Loan
  • Personal Loan

MONEY TIP

If you have a history of defaults resulting in a poor credit rating (or have previously been bankrupt), you can still get a business loan. To learn more about this type of business finance, you can read our Bad Credit Business Loans guide.


What is the best type of business loan in Australia?


The best business loan is the one that is most suitable for your business needs. Ideally, it gives you the amount of funding you need with repayments you can comfortably meet. The table below will allow you to quickly see which type of business loan may be suitable for your business needs.

How to choose a business loan

Need for business finance Business loan options
I need fast access to finance Small business loan
Unsecured business loan
Business credit card
Business overdraft
Business line of credit
I need a new business vehicle or equipment for my business Chattel mortgage
Finance lease
Commercial hire purchase (CHP)
Operating lease
I need flexible access to funds Business line of credit
Business overdraft
Invoice finance
Small business loan
I need a one-time or revolving credit facility Business credit card
Business line of credit
Business overdraft
I need upfront payment on customer invoices or overseas sales Invoice finance
Trade finance
I want to use an asset as security on a loan Secured business loan
I want to use my property as security and don’t need fast approval Traditional bank loan

The 11 most common uses for business loans in Australia


  • 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

How long should you take business finance for?


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 business loans:


  • 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.


MONEY TIP

Long-term business finance will often provide lower interest rates than shorter loans.

What are the interest rates and terms on Business Loans?


The interest rate applied to your loan will vary, depending on:

  • The type of finance you apply for
  • The loan term
  • The age and value of the asset or assets you wish to purchase
  • The security or collateral provided
  • Your personal credit profile
  • The credit profile of your business

In the table below, you can quickly see the current starting rate for different types of business loans in Australia. Alternatively, you can compare equipment finance interest rates here.


Business Loans Interest Rates Comparison

Type of Finance Interest Rates
Unsecured Business Loan From 9.90%
Small Business Loan From 5.00%
Business Line Of Credit From 5.07%
Business Overdraft From 5.07%
Business Credit Card From 5.88%
Equipment Finance From 4.49%
Trade Finance Rates set daily
Traditional Bank Loan From 4.40%
Personal Loan From 5.99%

How to choose a business lender for a loan


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 for a business loan will depend on the type of loan you are applying for and the profile of your business.

Banks


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.

Non-bank and specialist lenders


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.

MONEY TIP

Non-bank lenders provided over $1 billion in finance to small businesses in 2018, and are fast becoming the first choice for business owners seeking finance.

Dealerships


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.

Brokers


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.


Whichever type of business finance you are looking for, always research your options carefully and compare costs, terms, and conditions from several providers before making a decision, as these can vary widely and have a long-lasting impact on your business.


What do I need to apply?


To apply for a business loan in Australia, you’ll need to meet lender criteria and supply supporting documents so that they can assess your ability to repay the loan amount. The minimum requirements when applying for a business loan in Australia are:

  • An ABN (Australian Business Number)
  • A GST-registered business
  • Permanent Citizenship or Residency
  • A minimum business-operating time of six months
  • Business bank statements

However, the qualifying criteria will vary between lenders, and between business loan types. For example, you can still apply for a business loan if you:

  • Are self-employed
  • Are a sole trader
  • Have been trading for less than 12 months
  • Are unable to provide sufficient documentation

For the fastest approval on a business loan over $150,000, you’ll need to provide a lender with supporting documents when applying, including:

  • Proof of identity
  • Proof of time in operation
  • Financial records (provided by your accountant)
  • Profit and Loss Statements - for the previous six months
  • Balance Sheet
  • Business bank statements - for the previous six months
  • Rates notice (if you own a home)
  • Rental agreement (if you are renting)
  • ATO Portal access

How do business lenders assess loan applications?


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 a business loan application.


When applying for a business loan 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:

  • The structure of your business
  • The location of your business
  • The sector your business operates in
  • Your monthly and annual turnover
  • How long you have been operating
  • How much you wish to borrow and for what term
  • Details of the asset you wish to purchase
  • How you will use the funds - i.e. a business plan
  • Personal details - especially where you are required to provide a personal guarantee

To increase your chances of approval, your business plan should illustrate:

  • 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

Business Loans Summary


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 a business loan 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.


In summary, business loans in Australia:

  • Include many types of business finance, each with their own pros and cons
  • Provide fast access to vital cash flow for SMEs
  • Can be used to finance anything relating to a business
  • 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

Business Loans FAQ


How much am I able to borrow?


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 business loan in Australia is $30,000.

What are the best interest rates for business loans?


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. Business loan interest rates in Australia can be as low as 4.40% and as high as 40%.

How long does it take to get approved?


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.

Can I get a business loan if I don’t qualify with my bank?


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.

Where can I get guaranteed approval on a business loan in Australia?


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.