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Written byShaun McGowan
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.
Small 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.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
There are over 60 commercial finance lenders offering different types of business loan products. The most common business loans in Australia are a term loan. They allow a business to borrow money relative to the amount of revenue it generates and repay it over a set term.
SMEs generally need to have at least 6 months' trading history and a minimum monthly revenue of $5,000 to qualify. Business loans up to $150,000 can be approved and funded on the same day by only providing your bank statements.
There are two types of small business loan:
Just like other types of finance, a secured loan will often get you a better deal (lower rates, lower fees, more flexibility) because there is less risk placed on the lender.
A secured loan will use collateral (business or personal assets) relative to the value of the loan, which the lender can claim and sell-on in the event that you default on your loan repayments.
Business loans work similarly to other types of common finance arrangements:
In the next section, we’ll compare the various types of business finance and how they are commonly used, so you can decide which option is most suitable for your situation.
You can generally get a business loan if you have been trading at least 6 months with a minimum of $5,000 in monthly revenue.
Like any finance product, it's your ability to repay the loan that will determine how much you can borrow. The minimum loan amount is $5,000.
How long you have been trading for can influence the amount you can borrow.
Business loan lenders will often check both your company credit history and your personal.
You can read our guide to compare the benefits of a chattel mortgage vs lease vs hire purchase.
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. Business loan interest rates start from around 5%. For business finance with no security offered, rates start from around 12%.
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.
|Type of Business Loan||Lowest fixed interest rates|
Unsecured business loan
Small business loans
Business line of credit
From 1.5% (Factor Fee)
Bad credit business loan
There are three main ways lenders will advertise — and apply — interest on business loans:
The type of interest applied will make a significant difference to the total amount you will repay.
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:
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The cheapest business loans are generally offered to borrowers who are able to provide security on the loan, and have a strong business credit rating. These are strong indicators that the borrower will be able to comfortably meet their repayment obligations.
However, most lenders will only require your bank statements to assess your capacity to meet repayments, and you could find a great deal simply due to the strength of your business revenue versus the amount you wish to borrow.
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 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 meet your regular repayment obligations and repay the full loan amount plus interest.
There are many reasons you may be declined for a small business loan, and ensuring you apply for the right type of business loan (and with the correct documentation) is the easiest way to avoid this.
You can apply for a small business loan with banks or specialist online lenders.
Specialist lenders are well-known for providing fast approval. If you choose to apply with a specialist lender, you can apply online and often be approved the same day, as these types of lenders will only require your business bank statements to assess your ability to repay the loan amount.
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 will assess your application based on your personal credit profile and the strength of your business in a number of areas.
Business loan brokers can be found all across Australia — if you need a business loan and would like professional assistance in comparing your options, you can find business finance brokers in all major Australian cities; Sydney, Melbourne, Brisbane, Perth, Adelaide, Newcastle, and Canberra.
Loan Amount: --
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|YEAR||REMAINING BALANCE||MONTHLY REPAYMENT||INTEREST PAID||ENDING BALANCE|
A business can qualify for a small business loan if they can provide a lender with bank statements that illustrate their ability to comfortably repay the loan amount.
Yes, you have to provide bank statements to a lender when applying for a small business loan. This will allow a lender to quickly assess your business revenue and determine if you can comfortably repay the total loan amount and interest.
The main difference between a small business loan from a bank is that the application and approval process will take much longer than through a specialist lender. The main benefit of applying through a bank is a slightly lower interest rate.
Currently, small business loan interest rates in Australia range between 5% to 30%. Due to the number of lenders and loans available in Australia, the average interest rate varies. This is why it is important to ensure you compare lenders to find the best rate for your business.
No, you do not need a deposit for a business loan. It’s important to note that a deposit is not the same as security (collateral) and you will need to provide collateral if applying for a secured business loan.
Yes, you can get a small business loan If you have a poor credit rating. If you need to apply for a loan and have defaults or are an ex-bankrupt, you may wish to consider a bad credit business loan.
If you apply for a small business loan online with a specialist lender, you can often be approved for finance in under 24 hours.
Yes, a small business loan does not always require security. If you do not have collateral or do not want to provide security on a business loan, you can apply for an unsecured business loan.
In most cases, lenders will allow you to repay your loan early without any penalties or fees. If you plan on repaying your loan amount early to reduce the amount of interest you pay, check with your lender to ensure you won’t incur any fees or penalties for doing so.
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.