$20,000 business loans

Learn how to compare a business loan

What’s involved with a $20,000 loan?

When you take out a loan for any amount up to $20,000, you'll naturally have to repay the borrowed sum, plus associated fees and interest within a set time frame. Depending on the loan you take out, this time frame could be as little as one month, or over as long a period as seven years.

Once you apply, the lender in question reviews your application, and upon the loan’s approval it releases the funds. You then have to make payments in accordance with the payment schedule agreed upon by you in the loan’s contract.

How you use the loan’s proceeds varies according to the kind of loan you take. Loans that are tied to a guarantee – secured loans – are usually more restrictive in what they can be used for. For instance, with a secured car loan, lenders will normally stipulate whether they will let you finance a used car.

With business loans, you generally have to spend at least a fixed percentage of the borrowed amount towards business expenses.

The features to look out for when you’re borrowing up to $20,000

When looking for up to $20,000 business loans, you’ll come by numerous options, and what you have to bear in mind is features of loans can vary considerably.

• Secured or unsecured. If you can provide some form of asset to obtain a secured loan, you can often look forward to a lower interest rate when compared to taking an unsecured loan. Security can come in the form of a car, other vehicle, real estate, machinery, or even equipment. Whether you take out a secured or unsecured business loan depends a lot on what you're looking to finance.
• Interest rate. Some loans attract fixed rates of interest and some others charge variable interest. The difference is that while the interest rate of a fixed rate loan remains the same for the entire loan term, a variable rate loan's interest can increase or decrease in accordance with the prevailing market conditions.
• Loan amount. Lenders have set maximum loan amounts, including some that have set amounts for the first time you take out a loan. Make sure you'll be able to apply for the amount your business needs.
• Fees and charges. The fee structure of loans can vary from one offering to the next, but some of the common fees you can expect to pay include application fees, disbursement fees, settlement fees and early termination fees. Some financial institutions offer certain fee waivers as well.
• Repayment flexibility. Financial institutions that give you the ability to make weekly, fortnightly, or monthly payments are easy to find. With certain loans, you can make additional payments without paying penalties, and you can also pay some loans off ahead of time without worrying about prepayment penalties.

How to find the best $20,000 loan for you – Tips on your comparison

When you’re out there looking for up to $20,000 business loans, you can use knowledge to your advantage in different ways, and here are some tips that you can rely on to take you forward.

• If you can secure your loan with an asset you might want to consider doing it – lower rates and fees are a benefit some secured loans offer
• Don’t apply for the first loan that comes your way. Make sure you compare business loan interest rates and features of loans available to you
• Choose your loan term carefully. If you can afford to make higher repayments over a shorter loan term you can save in the form of interest
• Go through all associated fees and charges of any loan you wish to apply for as this can save you surprises and heartache down the road
• Understand all the features of the loan you wish to apply for. For instance, if a loan allows additional repayments, find out if it allows you to redraw these funds as well
• Make sure you deal with reputable lenders, because, sadly, the Australian lending marketplace is not devoid of its share of unscrupulous lenders

What to keep in mind before borrowing

Before you apply for up to $20,000 business loans, take the following into account:

• Establish if you really need the loan and if your business can afford the repayments
• Do you meet all the eligibility criteria? This needs to be made sure of before applying
• Take time to go through all the fees and charges associated with the loan you're looking at taking out
• Establish if you can afford to take the loan in the first place, and take your budget into account when it comes to making periodical repayments.

Frequently asked questions about $20,000 business loans

• Do I need to provide security for a $20,000 business loan?

  No, most business loans under $20,000 are unsecured and do not require physical assets like property or vehicles as collateral. Lenders assess these applications based on your business's cash flow, credit history and trading performance.

• How quickly can I access $20,000 in business funding?

  You can often receive funding within 24 hours of your application being approved. Many online lenders offer automated application processes that provide a conditional decision in minutes and settle funds on the same business day.

• Can a sole trader apply for a $20,000 business loan?

  Yes, sole traders are eligible for $20,000 business loans as long as they have an active ABN and meet minimum turnover requirements. Most lenders require at least 6 months of trading history and regular monthly business deposits.

• What documents are required for a $20,000 small business loan?

  You generally only need your ABN, a valid driver licence and 3 to 6 months of business bank statements. Because $20,000 is considered a smaller amount, many lenders treat it as a 'low-doc' application and do not require full tax returns or profit and loss statements.

• Can I use a $20,000 business loan to pay off ATO tax debt?

  Yes, many Australian non-bank lenders permit the use of business loan funds to settle outstanding tax obligations with the ATO. Using finance to clear tax debt can help you avoid ATO interest charges and improve your business's credit profile.

• What is the minimum monthly turnover required for a $20,000 loan?

  Most lenders require your business to have a minimum monthly turnover of at least $5,000 to $6,000. This ensures you have sufficient cash flow to cover the daily or weekly repayments associated with a small business loan.

Written by

Elizabeth Barry

Journalist

Add to Preferred Sources

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 151 Finder guides across topics including:

• Banking
• Personal finance
• Investing