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Small Business Loans with Money Matchmaker™

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Small Business Loans Australia

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.

In summary:

  • Many types of business finance, each with its own pros and cons
  • Provide fast access to vital cash flow for SMEs
  • Can be used to finance anything relating to a business
  • Can be obtained from banks for lower interest rates
  • Can be obtained from online lenders for fast approval timeframes
  • Are available without having to supply loads of paperwork

Shopping around for the right loan can save you thousands of dollars in interest and fees.

What is a Business Loan?

Business loans in Australia are a collection of finance products often used by small and medium-sized businesses. As the majority of Australian businesses are classified as SMEs, one of the most common types of business finance is a small business loan, which is a term loan that allows a business to borrow money relative to the amount of revenue it generates.

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:

  1. Secured - A business asset or your residential property is used to guarantee the loan
  2. Unsecured - You do not offer any security as a guarantee on the 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.

How they work

Business loans work similarly to other types of common finance arrangements:

  • A business owner will apply with a lender for a loan
  • The lender will assess the business’s borrowing potential based on its bank statements
  • The lender approves a loan between $5,000 and $500,000 with loan terms between one month and five years.
  • The lender and the borrower agree to a repayment amount and frequency
  • The borrower repays the lender the loan amount (principal) plus any fees (interest or ongoing monthly fees) until the loan is repaid in full.

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.

Key Features & Eligibility

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.

  • Borrow from $5,000 to anything
  • Low rate, fixed terms available
  • Repayments to suit your budget
  • Terms are generally from one month to five years
  • Secured & unsecured options

What lenders are looking for

How long you have been trading for can influence the amount you can borrow.

Time in business - Commercial Finance

How lenders view credit history

Business loan lenders will often check both your company credit history and your personal.

credit history applicant
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Best Business Loan rates

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.

Compare business loan interest rates

Type of Business LoanLowest fixed interest rates
Unsecured business loanFrom 12.00%
Small business loansFrom 5.00%
Business line of creditFrom 5.00%
Business overdraftFrom 14.95%
Equipment financeFrom 4.49%
Invoice financeFrom 1.5% (Factor Fee)
Fit-out financeFrom 7.49%
Bad credit business loanFrom 15.00%
Asset Finance for businesses

How to get the lowest interest rates on a Business Loan

There are three main ways lenders will advertise — and apply — interest on business loans:

  1. APR (Annual Percentage Rate)
  2. Simple Interest Rate
  3. Factor Rate

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:

  • Loan establishment fees
  • Monthly or annual fees
  • Late-payment penalties
  • Early repayment penalties

Money.com.au aims to clear up the confusion around rates and approval, so we can provide the best experience possible. We only show you real, personalised rates from lenders who can give you approval on the loan.

No hidden fees, no inflated rates, no stress, and no impact on your credit score.

Cheapest Business Loans

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 evaluate your business bank statements during the approval process to determine:

  • Your business revenue
  • How much you can borrow
  • Daily balance and monthly average
  • Your ability to service the loan based on business revenue
  • 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 meet your regular repayment obligations and repay the full loan amount plus interest.

There are a number of reasons lenders need to see bank statements, for example:

  • 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 financing its employees' 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

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.

Here are the top 5 reasons applications are declined:

  1. Your business financials do not illustrate an ability to service the loan amount
  2. A business owner or director has bad credit
  3. Your business revenue is too dependent on a small number of customers
  4. The outlook for your market sector is poor
  5. Your business hasn’t been operating for long enough
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How to qualify and apply

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.

The minimum requirements for a small business loan in Australia are:

  • An ABN
  • A GST-registered business
  • Permanent citizenship or residency
  • A minimum business-operating time of six months
  • Business bank statements

If you require more than $150,000, you will need to also provide:

  • Profit and Loss Statement — (provided by your accountant)
  • ATO Portal access

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.

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 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.

Here are the most popular business loan questions people are asking:

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How does a business qualify?

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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.

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Do I have to provide bank statements?

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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.

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What is the difference between a small business loan from a bank and a specialist lender?

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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.

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What is the average interest rate on a small business loan?

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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.

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Do you need a deposit for a business loan?

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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.

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Can I get a small business loan with bad credit?

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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.

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How long does approval take?

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If you apply for a small business loan online with a specialist lender, you can often be approved for finance in under 24 hours.

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Can a small business loan be unsecured?

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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.

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Can a business make early repayments?

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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.

Address

Money Pty Ltd,
Suite 3, Level 2,
1 Taylor Street,
Moorabbin, VIC, 3189 Australia

Company

Money Pty Ltd trading as Money
ABN: 42 626 094 773
ACL: 528698
AFCA: 83955

© Copyright 2021 Money Ltd.



Disclaimer

Money Pty Ltd (trading as Money.com.au) provides information about credit products and is authorised to do so as the holder of Australian Credit Licence 528698. Money.com.au does not compare every Lender in Australia. We are not a broker or credit provider and when we provide information via this website, we are not providing you with a recommendation or suggestion about a particular credit product. When you apply for a credit product via the Money.com.au website, you are not applying with us, you are applying directly with a Lender Partner. Before entering into any credit product from one of our Lender Partners, you should confirm the rates and product information with the Lender. All information on this website is general advice only and does not take into account your objectives, financial situation or needs. You should consider whether this advice is right for you and we encourage you to seek independent financial advice.