Looking to get more bang from your tax break buck?
Individuals and businesses need to borrow money from time to time, and as a small business owner you have various options when it comes to getting a loan of up to $20,000. There are a lot of reasons businesses might need loans, from buying materials or equipment, to getting the funds to expand the existing business, or making a business vehicle purchase.
You can look forward to claiming $20,000 on any assets your purchase for your business that are individually valued at under $20,000. This includes assets purchased using a loan.
The 2017 budget announced the extension of this program until June 30 2018, and raised eligibility from under $2 million annual turnover to under $10 million annual turnover. This means a lot more business can now benefit more quickly from business purchases under $20,000.
If t costs under $20,000 and your business needs it, then you may want to take out a business loan to get the benefits. There are a range of different lenders that borrowers get to choose from, as well as loan types to consider.
NAB QuickBiz Loan Offer
NAB QuickBiz Loan
from
fixed rate
- Borrow up to $100,000
- Get a response in 60 seconds
- Sole traders, partnerships and companies can apply
100% confidential application
NAB QuickBiz Loan Offer
The NAB QuickBiz Loan allows you to borrow up to $100,000 for your business needs. The loan is available for new or existing business needs and features no upfront fee and tax deductible interest repayments. Link your accounting software directly into the application.
- Interest rate from: 12.95% p.a.
- Interest rate type: Fixed
- Application fee: $0
- Minimum loan amount: $5,000
- Maximum loan amount: $100,000
Business loans available to apply for
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 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 to 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 a loan of up to $20,000 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 to 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 fees 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 to 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 a loan of up to $20,000, 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 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 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
Did you know about the tax benefits of spending up to $20,000 in a small business?
A recent budgetary announcement revolves around a temporary extension in what you can claim as instant asset write-offs. In 2015 this threshold increased considerably from $1,000 to $20,000, while the 2017 budget announced that the program is being extended until 2018. Also, the types of businesses that can take advantage of this have also expanded, from those with annual turnover under $2 million to those with annual turnover under $10 million.
If your registered business has an ABN and an annual turnover of less than ten million dollars, it can qualify for this tax break. Under the new ruling, you can make as many purchases under the $20,000 mark as you like for your small business and you can claim these immediately.
Some of what you can claim includes vehicles, tools, mechanical and electronic equipment, furniture, and office items. You cannot claim plants, internally developed software and inventory items.
The extension of this scheme means that if you’ve been thinking about starting a small business, now might be as good a time as any, mainly because this tax break enables you to make multiple purchases and claim immediate tax deductions until 2018 (provided any Income Tax provisions such as the "Non-Commercial Loss" rules are satisfied).
What to keep in mind before borrowing
Before you apply for a loan of up to $20,000, 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 loans
What are common loan terms for business loans?
Loan terms for business loans tend to vary between one and seven years, although the amount you borrow has a bearing on this. Less traditional business loans can be for much shorter periods, so ensure that you opt for a loan with terms that meet your budgetary needs.
Can I change a variable rate loan to a fixed rate loan?
This depends on your lender, and in case your lender allows this, you may have to pay a fee.
Can a variable rate business loan help fund a working capital shortfall?
While it can, you should consider getting a commercial overdraft in such a scenario, mainly because most business loans are best suited for long-term investments and business purposes like investing in property and equipment.
Can I make lump sum repayments towards my business loan?
This depends on the type of loan you have. While many variable rate loans allow lump sum payments without charging penalties, this is not the case with fixed rate loans.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.
I have just stated working a month ago. Do I qualify for a personal loan
Hi Justine,
Thank you for your inquiry.
Depending on the lender you’re applying for the loan with. Although the eligibility criteria for personal loans is set by each individual lender and is different for each type of personal loan, basically, lenders would need three payslips, bank statements and tax returns as proofs for your income.
I suggest that before you submit a final application, you should review the criteria and get in touch with the lender to discuss your options and chances of approval.
Cheers,
May