Business Loan Finder™ can help you compare your credit options and apply for a loan in minutes.
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The finder.com.au business loan comparison
Compare the features, rates and fees of the business loans below.
How does a business loan work?
Business loans can be secured or unsecured and can come as a line of credit or lump sum payment. Banks tend to require security for business loans, but you can find some that do not. Non-bank lenders, including those on this page, generally will not require security for a standard business loan and offer terms of between three months to three years.
Costs differ but a fixed rate is usually charged and repayments can be made daily, weekly or monthly depending on the lender you select. However, it's usually lined up with your business' cash flow. Depending on what you're borrowing for, how you need to repay and which lender you borrow from, the loan will work differently. Compare your options to find out.
Are you eligible for a business loan? How do business loan applications get approved? Why do applications get rejected? We take you through your business loan application to help you get it across the line.
Is your business eligible for a loan?
- Age of the business. You'll need to have been operating for at least one year for most unsecured business loans offered by alternative lenders and banks, but some do offer unsecured startup finance. Invoice factoring and equipment loans have less stringent criteria on business age, but you'll need to have been operating for at least one year for business overdrafts or a line of credit.
- Turnover. Your business may be required to be making a certain amount of turnover in order to be eligible for a loan. This revenue may be monthly or yearly and can range from $50,000 p.a. to $200,000+. Other lenders simply require you to connect your business' accounting software or financials as part of the application process so it can calculate a loan your business can afford.
- Credit profile. The personal credit histories of the directors may be checked along with the company's credit (unless you're a startup). If the business has unpaid defaults or tax debt you may need to find a bad credit business loan.
- ABN/ACN. You'll need to have an Australian Business Number (ABN) or Australian Company Number (ACN).
What business financing options are available?
Business finance is split into two main categories: debt finance and equity finance. Equity finance is provided by an owner or an external investor, whereas debt finance is provided by a bank, credit union or business lender. Below, you can find out more information about the different types of short-term and long-term debt finance that are available.
- Usually come with an application fee, line or facility fees and interest is paid monthly when the overdraft funds are used
Business line of credit
- Draw on an account balance up to an approved limit
- Line of credits can be secured or unsecured and more non-traditional lenders are starting to offer them
- Interest is usually charged monthly and repayments include interest plus fees
Short-term business loan
- A new type of business loan offered by non-traditional lenders with terms usually of between three and 12 months
- Repayments are usually daily or weekly to mitigate the impact on a business' cash flow
- Interest may be charged on the principal or the outstanding amount depending on the lender and fees may apply
- Interest can range from 8-20% if balance is not paid back monthly
Cash flow lending
- Use your working capital assets as security for a loan
- Draw down on funds as required, with your cash flow determining your loan
- Interest is charged on the balance outstanding and fees may apply
- You'll need to pay a percentage of the invoice amount
- Fund the purchase of goods from domestic or international suppliers
- You can find financing in various types, such as letters of credit or bank guarantees between the buyer and seller
- You'll be charged interest on the amount provided for each trade as well as fees
- Long-term financing available to purchase a business, property or equipment
- A longer loan term of up to ten years is usually available
- Repayments are usually made monthly with both fixed and variable rates available
Business vehicle finance
- Repayment terms vary depending on the type of finance selected but competitive rates are on offer if the loan is secured
- Financing options are available to let you purchase or lease equipment
- Commercial loans, equipment hire purchases, finance leases and novated leases
How do lenders judge your business loan application?
Lenders use a variety of criteria to see if you fit their risk profile and ensure your business can repay the loan.
- Age and turnover of the business. Startup finance is harder to find and be approved for, so if your business is established you will find it easier to be eligible for a loan. The turnover of the business is also considered with lenders usually having a minimum requirement for monthly or annual turnover, or using your turnover to determine what the business can afford to repay.
- Credit profile. The director's personal credit scores will be assessed as part of the application process and, if the business is established, so will the company's credit score.
- Credit card volume. If you receive credit card payments in your business, lenders may use the volume of these payments to judge your ability to repay the loan. The assumption among some new lenders is that this volume will largely be used to repay the loan.
- Accounts receivable. Similar to credit card volume, lenders may factor your accounts receivable value into their asset ratios to help them make a decision.
- Company structure. Lenders will check what company structure you have and how long you have been in the existing structure. If you have recently undertaken a restructure or are applying for finance in the middle of restructuring, lenders may not want to finance you at this time.
- Existing debt. Does your business have an existing debt with another lender? This will be considered as part of your application.
- Profitability. For a revolving line of credit your business will usually need to be profitable to be approved.
Common mistakes that can get your application rejected
- Frequent changes to your company structure. One way lenders judge your business is to see how long you've been in your current structure. If you're applying for finance when you're undergoing a restructure, or if you've been through multiple restructures, this could be a red flag.
- Not having a clear loan purpose. If you don't have a clearly defined plan for all the funds you're applying for then lenders will be hesitant to lend it to you, even if your financials show you can repay it. Have cash flow projections that incorporate the loan you're applying for and show how you will use and repay it.
- Asking for too much. Lenders will use the information you give in your application, including business details and account information, to work out how much you can comfortably afford to borrow. If you ask for too much at the onset the lender may reject the loan rather than offer you a lower amount. However, asking for too little may mean you need to borrow again soon. Work out how much you can comfortably afford so you have the best chance of being approved.
- Being impatient. Each lender will have a different loan approval process and the first lender you approach may not necessarily close the deal for you. You are entitled to ask your lender how long the process will take, but keep it mind it may take longer than you first thought. Take the time to do the paperwork properly because it will be used to determine whether your loan will be approved or not.
- Relying on your cash flow. Lenders look at things other than cash flow, such as how long the business has been in operation, the financial situation of the directors and the reason for the loan. Remember to give as much detail as possible to help your application.
How can you compare your business finance options?
- Do you meet the eligibility criteria? Checking you meet the minimum eligibility criteria before you apply is the first step in your comparison process. This will help you narrow down choices that are the most suitable for you.
- How much will the business loan cost? If you know what loan you need, the next step is deciding what your business can afford. Look at your incomings and outgoings to see what you could comfortably repay without putting too much strain on the business. If it's a loan for a startup, you'll need to rely on cash flow projections.
- Do the repayment terms meet your business' needs? Lenders offer repayment terms of varying flexibility. Some will allow you to repay daily, others weekly and some will require you to repay your loan monthly. Work out which will best meet your business' needs in terms of your cash flow.
Information about business loans you might find useful
How much do business lenders charge?
Costs vary significantly depending on the lender, but you will generally be able to find out the costs structure before you apply. Some lenders charge interest and others charge factor rates, where the interest doesn't compound. Most non-bank lenders charge their rates daily as this is when your repayments will be direct-debited from your account, whereas banks will charge an annual fee.
You may need to pay an establishment fee but can generally repay early without penalty.
How long will I have to repay my loan?
Repayment terms differ depending on how much you borrow and what lender you apply with. Generally, you'll have between three months and three years to repay a loan from a non-bank lender, but banks offer longer periods.
Is my personal credit file checked or my company credit file?
The lender will specify which credit history they will need to check, but generally, it's the director's credit histories that need to be verified. Your business' financials may also be checked using accounting information that you connect as part of the application process.
Read the guide on business loans and your credit file
What's the difference between a fixed term loan and a line of credit?
A fixed term loan will provide you with a lump sum when you're approved for the loan and the repayments will be arranged so the loan is repaid by the end of your loan terms. A line of credit is where you are given a certain limit that you can draw up to and including as per your business needs. Some lenders can approve you for a limit but will not charge you if you decide not to use it. As you repay the line of credit the funds become available for you to use again.
Is there anything you should avoid?
Don't apply for a business loan until you can present a good case to the lender to prove your suitability as a borrower. You'll be required to show your business' financials and cash flow. Make sure you have reviewed the minimum criteria for the loan and made sure your business meets it – if you aren't sure, check directly with the lender.
"My business loan application wasn't approved. Now, what?"
There are a range of reasons why a business loan application can be denied, it is important to ask for feedback from your lender if you do get rejected. This feedback will give you an insight into what you did wrong, which you can improve on for the next time you apply.
If the lender is unable to provide this feedback you may want to review your application and see if you can spot any red flags yourself. Common reasons can include bad credit listings, cash flow issues, insufficient security or simply not meeting the lender's criteria. Before applying again make sure you compare your options thoroughly so you apply with a lender that meets your needs and suits your financial situation.
Where in Australia can I get a business loan?
No matter where in Australia you're looking for business finance, there are loan options available. Take a look at the map below to see what some of your options could be.
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