Compare business loans in Australia

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What is a business loan?

Business loans are lending products designed to help business owners fund business operations, purchase stock, pay staff, manage cash flow or expand.

The right business loan can keep your business afloat when you're dealing with seasonal cash flow or just short on cash. It could also help you seize on an opportunity and grow your business to new heights.

Unlike a personal loan, a business loan must be specifically for business or investment purposes. To get a loan approved the lender considers the performance and history of your business, plus your own credit history.

How do business loans work?

You can get a business loan from most Australian banks or from online business lenders.

The amount you can borrow, your interest rate and whether you need security all depend on your lender's requirements and your business's size, needs and financial position.

Things that will affect how your business loan works are:

• Security. With a secured business loan you could offer a business asset or property as collateral. You can get a lower interest rate in return.
• Eligibility. Many lenders require your business to have been operating for 1 to 2 years, with financial records for that time. Lenders examine cash flow projections, business activity statements and conduct credit checks on company directors.
• Loan type. Some business loans provide you with a single lump sum, which you pay off over time like any loan. But there are business overdrafts that let you spend beyond what's in your bank account to cover shortfalls, or lines of credit that let you spend money flexibly.
• Interest rate. You can get business loans with fixed or variable interest rates from most lenders. Secured business loans have the most competitive rates.

Which type of business loan is best for my business?

Choosing the right business loan depends on your business and what you're trying to achieve.

Business term loans

The most straightforward business loan, where you apply for a loan and receive the funds in a lump sum. You can get secured and unsecured business loans for flexible amounts, and can receive a variable or fixed interest . These loans are useful when you're trying to cover large expenses.

Business line of credit

A business line of credit gives you a pool of money that you can withdraw and pay off whenever you want. Once you're approved for a line of credit you can spend money flexibly, up to the credit limit amount. You only pay interest on the money you withdraw, not the overall limit you're approved for.

This is useful for businesses that have to cover multiple smaller expenses over time or have seasonal spikes and dips in revenue.

Business vehicle finance

Loans to cover the purchase of business vehicles including cars and trucks. These come with a range of options, such as leasing the vehicles or buying the vehicles outright. They can be used to buy individual vehicles or an entire fleet.

Equipment finance

Loans to cover the purchase of business equipment, such as computers, tools, coffee machines, or kitchen fit-outs. You can rent, lease or buy outright.

Invoice finance

Invoice financing lets you use outstanding invoices, which represent future payments, to get cash when you need it now. A cut of the outstanding invoice is paid to the lender in return for the upfront funds.

Business overdraft

If you have a business bank account you can get an approved overdraft limit to borrow beyond what's in the account. This is useful to cover brief cash flow shortfalls that are not predictable enough to require a line of credit.

Business credit cards

Business credit cards let you cover business expenses now and pay them off over time. Useful for sole traders, small businesses, or to fund the business needs of trusted staff.

How to compare business loans

Even when you've decided which type of business loan your business needs, there are still other things to consider before landing on the right loan for you.

Interest rates

Business loan interest rates will vary depending on your lender, your loan type, and your own (and your business's) financial position. You can choose between a variable rate or a fixed rate. Lenders can move their variable rates in line with the cash rate and you have more flexibility to make extra repayments. Fixed rates stay the same for the life of the loan, but you generally can't make extra repayments.

Fees

Factor in the cost of loan fees along with the interest payments to know the true cost of the loan.

The most common business loan fees include:

• Establishment fee: Many lenders charge a one-off, upfront establishment or origination fee. This fee is often a percentage of the loan amount. A 3% establishment fee on a $300,000 business loan would cost you $9,000.
• Monthly or annual account keeping fees: Some lenders charge a smaller ongoing fee to maintain the loan account.
• Late fee: If you miss a loan repayment your lender may charge you a fee.
• Extra repayment fee: Some loans, typically fixed rate loans, don't let you make extra repayments to the loan or charge a fee for doing so.

Security

If you have a commercial or residential property to offer as security you can get a loan with a lower interest rate.

Loan term

Longer loan terms suit larger loan amounts. Longer terms also mean smaller monthly repayments but more interest charged over time. Shorter terms increase your monthly repayments but you pay less interest.

Loan flexibility

Look for a flexible loan. If you can repay a loan early you can save money. Flexible business loans let you redraw extra repayments in an emergency.

Your business

Ask yourself what your business needs the loan for, how established your business is and what the business financial situation is. Your business profile and situation will have an impact on what loan you choose or are approved for.

For example, if you need to cover multiple small expenses over a short time, you might look at an overdraft, line of credit or business credit card.

Our expert says: Prepare a thorough loan application

"When lenders assess your business loan application they will consider your business purpose, your historical business finances and your financial projections. They'll also consider the business credit score as well as your personal credit score and financial situation.

Because of this it's really important to do all the calculations and collate all the information to put the best application forward.

It's also a good idea to speak to your accountant or finance broker for help and support."

Rebecca Pike

Senior Money Writer

How do I apply for a business loan?

1. Work out what type of business loan you need.
2. Compare loans and rates from multiple lenders.
3. Prepare all your personal and business financial records and documents.
4. Complete the application.
5. Wait for the funds to reach your account.

Online business lenders can approve applications quickly. A traditional bank may take longer and you have to speak to a lending specialist from the bank first.

Documents you need for a business loan application

• A valid ABN or ACN for your business.
• Annual financial statements that include a balance sheet and income statement
• Recent individual tax returns, an ATO notice of assessment and other details.
• Credit reports for you and your business (the lender will check this).
• Information about the property or asset you're offering as security.

Why you can trust Finder's business loan experts

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Frequently asked questions about business loans

• How much can I borrow with a business loan?

  You can get a business loan that's as small as $5,000. Some lenders will lend as much as $250,000 or even $500,000.

  For larger businesses loan amounts are much higher and can run into the millions of dollars.

• Will business loan lenders look at my personal credit score?

  Yes, in many cases a lender checks a business owner or company director's credit score. Your credit history is especially important if you don't have a long, established business history or assets to support your application.

• How do credit scores and business loans work?

  Lenders assess individual borrowers along with the business itself. For larger businesses, a lender will check a company director's credit report.

  Having a good credit history is even more important for sole traders and small business owners. There are also credit scores specifically for businesses.

  You can improve both personal and business credit scores by establishing a good track record of repaying debts on time, not missing bills or loan repayments and avoiding applying for too many credit products at once.

• Should I get a business loan from my current bank?

  Many banks only offer business loans to borrowers who have a business account with the bank. If you're looking for a smaller loan for a new business, even having an existing personal account with a bank can make business loan approval easier.

  But it's always a good idea to compare your options before making a big financial decision.

• Can a business loan impact my personal credit score?

  If you apply for multiple loans, the lender will make an enquiry on your credit report each time. Even for a business loan. These enquiries are recorded on your credit report and can lower your score.

  Avoid applying for multiple credit products at once. Find one loan and apply. If you get rejected, work out why and fix any issues before applying again.

• What is the difference between debt finance and equity finance?

  Debt finance means making regular repayments on money you've borrowed, with fees and interest charges. These loans are useful for long-running businesses but harder to get for startups.

  Equity finance is much more flexible and you don't have to make regular repayments. But equity finance involves bringing in outside investors. You might have to give up part ownership of your company and share your future profits with the investors.

To make sure you get accurate and helpful information, this guide has been edited by Richard Whitten and reviewed by Justine Mclean, a member of Finder's Editorial Review Board.

Written by

Elizabeth Barry

Journalist

Elizabeth Barry is an experienced journalist with over 10 years of expertise in personal finance, contributing to outlets like the ABC, Sydney Morning Herald, and 7News. She holds a Master of Arts in Creative Writing and a Bachelor of Arts in Communication from the University of Technology Sydney, and has earned multiple award nominations, including a Highly Commended recognition at the 2017 Lizzies. Elizabeth began her career at Finder in 2013, progressing through roles to become Lead Editor, where she oversaw a wide range of personal finance coverage until 2024. See full bio

Elizabeth's expertise

Elizabeth has written 208 Finder guides across topics including:

• Banking
• Personal finance
• Investing