How to determine your business financing options

Compare and choose financing options to find the right source of funding for your business.

Whether you’re starting a new business or looking for ways to help your existing business grow, having sufficient capital to fund your plans is essential. However, with such a huge array of business financing options to choose from, selecting the right one for your business can be a confusing and complicated task.

Let’s take a closer look at the business loan and funding options available to you, and how you can determine the best type of financing for your business.

Prospa Business Loan Offer

Prospa Business Loan

  • Borrow up to $250,000
  • Same-day turnaround
  • Repay early without penalty
Security Logo

100% confidential application

Prospa Business Loan Offer

The Prospa Business Loan allows you to borrow up to $250,000 for your business needs. The loan is available for new or existing business needs and features no upfront fee and no fees for early repayment.

  • Interest rate type: Variable
  • Application fee: $0
  • Minimum loan amount: $5,000
  • Maximum loan amount: $250,000
Go to site

Here are some options you could apply for your business

Rates last updated October 23rd, 2017
Name Product Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan
$5,000
$250,000
0.25 to 1 years
$0
Apply for a business loan from $5,000 and enjoy a shorter loan term up to 12 months. Note: Financial statements required on loans over $50,000.
NAB QuickBiz Loan
$5,000
$50,000
1 to 2 years
$0
An unsecured business loan from $5,000 that can be processed in 1 business day.
Spotcap Loans
$10,000
$250,000
1 year
$0
Take advantage of a fixed interest rate and no upfront fees on this business loan, available up to $250,000. Note: Business must have been operating for at least 18 months and have turnover over $200,000.
Moula Business Loan
$5,000
$250,000
0.5 to 1 years
$0
Small business loans of up $250,000 approved and funded within 24 hours. Transparent fees and rates. Note: Business must have been operating for at least 12 months and have monthly sales of at least $5,000.
Sail Unsecured Business Loan
$5,000
$100,000
1 year
2.5% origination fee
Take advantage of a convenient business loan available from $5,000. Bad credit applicants considered. Note: Business must have been operating for at least 6 months and have turnover over $50,000.
RateSetter Business Loan
$10,000
$150,000
0.5 to 5 years
0.5%
Apply for up to $150,000 and choose between a secured or unsecured loan. Note: Business must have been operating for at least 2 years and have turnover over $250,000.
GetCapital Flexible Business Loan
$5,000
$500,000
0.25 to 1 years
Upfront fee of 1%
A business line of credit that allows you to earn Qantas Aquire Points. Note: Business must have been operating for at least 9 months and have monthly sales of at least $10,000.

Compare up to 4 providers

payday-warningDo you really need a loan today?*

It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:

  • For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
  • Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
  • If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94

The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.

What types of business finance are there?

Business finance options can be split up into three main categories:

  • Debt finance. This is the type of finance most people associate with business funding. With debt finance, you borrow money from a lender (ie, you take on a level of debt) and then pay it back over a predetermined period. Loans are available from banks, non-bank lenders and online lenders, with secured and unsecured loans available to suit an extensive range of purposes. On the downside, you’ll need to put your business profits towards paying off the debt.
  • Equity finance. Rather than borrowing money from a lender, equity finance sees your business acquire funds from angel investors, venture capitalists or from listing your company on the stock exchange via a public float. You can even source the necessary funds from family and friends who are willing to put their money where their mouth is to support your business idea. The advantages of equity finance are that you may be able to raise a substantial amount of money without taking on any debt. However, finding suitable investors can be a time-consuming process and you may need to give up some control of the business.
  • Internal funds. The final finance option is to use your cash flow and business profits to provide the capital you need. While this means you don’t have to worry about taking on debt and repaying any borrowed money, it can affect your cash flow and lead to financial difficulty if your business experiences a downturn.

How do I determine what type of finance my business needs?

To work out which type of finance is the right fit for your business, consider the following questions:

  • Why does your business need the loan? Are you looking to start a new business from scratch, upgrade your equipment, overcome a cash flow shortage or solve one of a myriad other business challenges? For example, if you’re looking to invest in new business equipment, you’ll want to consider your equipment finance options.
  • Where is your business in its lifestage? Your business’s lifestage has a big impact on its financial requirements and therefore on the type of finance you should choose. Our guides to business borrowing can help you understand your business needs and finance options, regardless of whether you’re a startup, early-stage business, going through a period of high growth, running an established business, reinvigorating a stagnant business or looking to turn around a business in decline.
  • What’s the state of your business finances? The current financial performance of your business will not only affect the type of funding you need, but also your ability to qualify for different types of loans. Your credit history will also affect the range of financing options you are able to access.
  • What industry is your business in? The industry you’re in also affects your funding needs and finance options. It goes without saying that a retail store will have different financing requirements to a microbrewery, which will in turn have different needs to a beauty salon.

Once you’ve answered these questions you’ll have a better idea of which type of finance is right for you. Then it’s time to start comparing the different loans and sources of funding available.

What types of business debt loans are there?

The table below features a rundown of all the business debt finance options available to help you grow your business:

Loan typeLoan amountProsCons
Business term loan$5,000 to $500,000
  • Allows you to borrow a single sum and pay it back over a predetermined term
  • Wide range of loans available
  • Fixed- and variable-rate options
  • Can fund major purchases
  • Terms of 15 years or more available
  • Need to make regular repayments, which may be difficult if your business experiences cash flow fluctuations
  • You will often have to offer an asset as security
  • Borrowing a large amount increases your exposure to risk
Business line of credit$10,000 to $1,000,000
  • Access funds whenever you need them
  • Great for overcoming cash flow shortages
  • You only need to pay interest on the money you spend
  • Because you usually borrow less than you would with a term loan, there is less risk for your business
  • Terms can be fixed or ongoing
  • Interest charges and fees apply
  • Not a long-term financing solution
Business overdraft$10,000 to $100,000,000
  • Easy and convenient
  • Allows you to overdraw on your business bank account (up to a predetermined limit)
  • Secured or unsecured options available
  • Flexible repayments
  • Can use the funds however you like
  • Higher fees than other loan options
  • Need to have an existing business bank account
  • Your current bank account may not have favourable overdraft terms
Business credit cardDepends on card limit
  • Access to funds whenever you need them
  • Monthly repayments to reduce your debt
  • Handy for managing day-to-day expenses of running a business
  • Many cards allow you to earn frequent flyer or reward points
  • Higher interest rates than other funding options
  • Interest charges can quickly add up
  • Good credit history required
  • Annual fee applies
  • Need to monitor spending to stay within card limit
Invoice financing80% of the invoice amount
  • Useful option for business that offer extended payment terms to customers
  • No interest charges to worry about
  • Don’t need to provide an asset as security
  • No stress of ongoing repayments
  • Fees and charges apply
  • Less control over the funds
  • Can cause problems if customers don’t pay
Equipment financeCost of business equipment you need to purchase
  • Provides the funds you need to purchase essential business equipment
  • Equipment is used as security for the loan
  • Several financing options available
  • Fixed and variable rates and flexible payment options available
  • Potentially tax deductible
  • Wide range of finance options can be overwhelming
  • Fees apply

What types of business equity sources are there?

If you think equity finance is the way to go for your business, consider the funding sources outlined in the table below:

Funding sourceHow it worksProsCons
Angel investorsGroups or individuals provide funding to businesses in the hope of enjoying substantial capital gains on their investment in the future
  • Can provide you with expertise and access to important contacts
  • Can potentially provide a large amount of funding
  • You don’t have to worry about interest charges or repaying the money invested in your business
  • Great for businesses experiencing high growth
  • Worth considering for businesses that are too small to raise money through a public float
  • Only tend to invest in specific industries
  • Can be difficult to find suitable investors
  • You may need to give up some control of your business
  • You may have conflicts with investors
  • Investors may place restrictions on how you can use their funds
Venture capitalistsVenture capitalists invest in startup or early-stage businesses, providing funds to help your business grow in return for equity in the business
  • Can access large amounts
  • Can also help you increase your network of contacts and access specialist business expertise
  • No need to worry about taking on debt or managing repayments
  • Worth considering for businesses that are too small to raise money through a public float
  • You may lose control over business decisions
  • Can be difficult to find funding
Public floatRaise capital by listing your business on the Australian Securities Exchange (ASX) so investors can purchase shares
  • No need to take on debt
  • No need to worry about interest charges and loan repayments
  • Can potentially access significant capital to develop and grow your business
  • Going public can be a complicated and expensive process
  • Requires increased transparency
  • You’re answerable to shareholders
  • Your business may be vulnerable to market fluctuations
Family and friendsYour loved ones and friends provide funds to help you grow your business
  • You deal with people you know
  • Funds could be in the form of a loan or an investment in your business
  • Friends and family can support you to realise your vision
  • Financial issues between family and friends are always at risk of getting messy and complicated
  • Friends and family may have their own ideas about how the business should be run
CrowdfundingInvestors pledge money to support your business through online crowdfunding platforms. In return they get perks and rewards, or in some cases equity in your company
  • Allows businesses to access funding outside traditional channels
  • Access thousands of potential investors
  • Investors come to you rather than you searching for them
  • Legislation still catching up with this relatively new form of financing
  • You’ll need to share business ideas and plans in a public forum
  • If investors receive a stake in your business, they can have their say on how your business is run

Using internal funds to finance growth

The final business finance option is to finance the future development of your business from your own profits. Of course, this approach also has its own benefits and drawbacks:

Pros

  • You don’t take on any debt. Borrowing money always comes with a level of risk attached; using your own money removes that risk.
  • No repayments. When you use internal funds to grow your business, there is no need to worry about the effect of ongoing interest charges and whether or not you will be able to afford your regular repayments.
  • You stay in full control of your business. With no investors or shareholders to keep happy and no lender to repay, you can retain full control of your pride and joy.

Cons

  • May not be enough money available. Your profits may not provide sufficient capital to fund your growth or expansion plans.
  • Can cause problems if you experience a downturn. If cash flow dries up and your business experiences a difficult patch, having money in the bank can be crucial to see you through until times improve.

Business financing is a complicated area and there are myriad options available. Consider the needs of your business carefully before choosing any one option, and if possible seek expert advice from your accountant.

Was this content helpful to you? No  Yes

Related Posts

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, read the PDS or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question