How much funding do you need for your business?
"My business funding was super quick. Really appreciated the fast turn around. Getting a small business loan is much easier than it used to be. You can literally get funding the same day!"
A small business loan is a type of business loan specifically for small and
medium-sized businesses. Generally you need to have been trading for at least 6 months and have a
minimum monthly revenue of $5,000. Loans up to $150,000 can be approved and funded on the same day with
only providing your bank statements and no security.
The best small business
loans available are perfect if you need fast access to working capital or to pay one time
expenses.
In this guide, you’ll learn:
A small business loan is a term loan that allows a business to borrow an amount of money based on the
amount of revenue generated by the business. The business will then repay the lender over an agreed
term. Loan amounts can range anywhere from $5,000 up to $500,000, with loan terms between one month
and five years.
There are two types of small business loan:
A business asset or your residential property is used to guarantee the loan
You do not offer any security as a guarantee on the loan
You can read all about how to apply for a loan without security in our unsecured business loans guide.
Secured loans present less risk to a lender, and will often have lower interest rates than an unsecured loan.
Over 70% of Australian businesses have ‘credit’ of some form. Small business loans
are used by all kinds of Australian businesses. They are incredibly popular with seasonal
businesses, or SMEs that require fast access to working capital.
Below are the top 10 reasons
Australian SMEs use these loans:
Increase working capital
Buy inventory and stock
Buy equipment or machinery
Smooth out seasonal cash flow
Pay staff or employ new staff
Renovations
Advertising and Marketing
Buy a competitor out
Move premises
Pay BAS or Tax Payments
For other items - e.g. a car for business purposes - you would want to use a chattel mortgage, a particular finance with
tax benefits for business. For larger pieces of equipment for your business, or a fit out, you may wish
to consider equipment finance.
If you'd
like to learn about the tax benefits of various types of equipment finance in Australia, you can read
our chattel mortgage vs
lease vs hire purchase comparison guide.
A chattel mortgage offers considerable tax benefits for a business financing a vehicle predominantly for business use (at least 51% business use).
You can apply for a small business loan with banks or specialist online lenders. If you choose to apply
with your bank, the application and approval process will often be much more complex and time-consuming
and more often than not, banks do not like to fund smaller amounts to business. If you’re applying for
less than $100,000 you may wish to look first at a specialist lender.
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.
You can
apply for a Small Business Loan online with a number of specialist lenders. You can see how each
business finance lender compares in our reviews:
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
Qualifying for a small business loan is very simple - if your business bank statements illustrate an
ability to comfortably repay your desired loan amount within the agreed loan term, you will qualify for
approval. It’s that simple!
If you are applying for an amount up to $150,000,
you will likely be approved the same day. If you are applying for more than $150,000, you will need to
demonstrate to a lender that your business revenue is sufficient to repay the higher amount, and that
your business revenue will remain stable for the term.
There are many reasons you may be declined for a small business loan, and
avoiding this can often this can be as simple as ensuring you apply for the right type of business loan
and with the correct documentation.
Here are the top 5 reasons applications are
declined:
Your business financials do not illustrate an ability to service the loan amount
A business-owner or director has bad credit
Your business revenue is too dependent on a small number of customers
The outlook for your market sector is poor
Your business hasn’t been operating for long enough
If you have a poor credit rating but still need to apply, you can learn about the process and how to choose the right lender in our bad credit business loans guide.
A business plan can be a powerful tool in demonstrating to a lender how you will use and repay the loan amount.
In Australia, you can borrow between $5,000 and $500,000 on a small business loan. The
average loan amount for small business is $30,000.
If you want to quickly compare repayments, you
can use our free Business Loan
Calculator.
Important: The actual amount you can borrow will vary between lenders
The interest rates on a small business loan in Australia range between 5% to
30%.
The interest rate applied to your loan will depend on the amount you wish to
borrow, the lender you apply with, and the profile of your business. For example, a business with a
strong, consistent trading history and stable revenue will likely be offered a lower interest rate than
a new business with irregular profits.
Important: This is an example and actual rates may differ
Terms on a small business loan can range from one month up to five years. The average term is around 12 months - a short-term loan can help your business with working capital, while a longer term can be used for bigger purchases.
If you have a poor credit rating but still need to apply, you can learn about the process and how to choose the right lender in our bad credit business loans guide.
Type of Business: Retail
Loan Amount: $30,000
A retail business has been in operation for a number of years.
In previous years, the
business owner has seen a consistent spike in sales between December and January which resulted
in the store’s entire inventory being sold out.
Based on this reliable trading pattern
and projected revenue over the holiday period, this year the business owner is confident they
can purchase an additional $30,000 of inventory and sell it to increase their profits.
The
business takes out a small business loan to purchase additional stock, which they are then able
to sell for an increased total annual profit. The business owner then comfortably repays the
loan amount in full, and the retail store has boosted cash flow for the coming year.
If you’re not looking to fund a one-off purchase or expense, you may wish to consider a different type of small business finance. You may wish to consider either:
Each of these types of business funding will allow you to have access to funds should you need them, the benefit being you do not need to pay anything on the undrawn amount.
Small business loans in Australia allow borrowers to access funding from their bank or lender, with the
approved amount dictated by the revenue of the business. Banks will offer lower rates, while specialist
lenders offer same-day approval. The type of lender most suitable for you will depend entirely on your
business.
In summary:
Are available from banks and specialist lenders
Only require your bank statements to assess approval
Can range from $5,000 to $500,000
Are offered between one month and five years
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 - or 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. To learn how to
apply for a loan if you have defaults or are an ex-bankrupt, read our bad credit business
loans guide.
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 read our unsecured
business loans guide.
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.
When comparing lenders, there are three important aspects of a small business loan to
consider:
The loan amount
The interest rate
The fees or charges for your loan
