Low interest business loans

If you can offer an asset as security this will lower your risk profile. A lower risk profile means lower interest rates.

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Interest rates are a major contributing factor to the cost of a business loan, which is one of the reasons low interest business loans are so tempting. Saving just one or two percent on your interest rate could save you thousands on your repayments. Although, the interest rate isn't the only cost involved with a business loan. You should still factor in any application fees, late/early repayment fees or services fees that might apply.

Why do these business loans have "low interest"?

There are three primary reasons why a business loan may be considered "low interest".

  • While the interest rate is low, the loan also includes other ongoing fees and charges that increase the overall cost of the loan.
  • The loan has a long term, with less frequent and longer payments. This will make the repayments more affordable in the short term, but the overall cost of the loan will be higher over the full term of the loan.
  • Your business and loan purpose is considered so low risk that the lender is willing to offer an interest rate discount. This is particularly the case if you're able to offer residential property as security for a business loan – lenders may offer an interest rate discount to bring rates closer to home loan mortgage rates than standard business interest rates.

Compare a range of business loans

Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Heritage Bank Fully Drawn Business Loan
$20,000
No maximum amount
1 to 25 years
Application fee is available upon application
Get access to a loan from $20,000 with no maximum limit with Heritage Bank. Loans can be secured by residential and non-residential property and have terms of up to 25 years.
Swoop Finance Business Loan
$1,000
$100,000,000
1 to 20 years
Depending on your loan contract
Apply online and borrow between $1,000 and $100,000,000. Options for good and bad credit borrowers.
Zip Business Loan
$10,000
$500,000
6 months to 3 years
No establishment fee
Borrow up to $500,000 with loan terms of up to 3 years. Flexible weekly, fortnightly and monthly repayment options available with no early repayment fees.
Moula Business Loan
$5,000
$250,000
1 to 2 years
2% Establishment fee
A loan of up to $250,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.
Lumi Unsecured Business Loan
$5,000
$300,000
3 months to 3 years
2.5% establishment fee
Apply for up to $300,000 from Lumi and benefit from short loan terms, no early repayment fees and once approved receive your funds in just one business day.
Capify Unsecured Business Loan
$5,000
$300,000
3 to 13 months
3% origination fee
An unsecured business loan up to $300,000 for eligible businesses. Businesses operating for a minimum of 6 months and having turnover of at least $10,000 a month can apply.
ebroker Business Loan
$5,000
$5,000,000
1 month to 30 years
$0 application fee
Small business loans available between $5,000 and $5,000,000. Get access to 70+ non-bank lenders on this independent platform.
Max Funding Unsecured Business Loan
$3,000
$30,000
1 month to 1 year
$0 application fee
An unsecured business loan from $3,000 that offers convenient pre-approval and no early repayment fees.
Valiant Finance Business Loan Broker
$5,000
$1,000,000
3 months to 5 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
OnDeck Business Loans
$10,000
$250,000
6 months to 2 years
3% of loan amount
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
Octet Trade Finance
$100,000
$7,000,000
1 month to 2 years
Transaction fee 2.5%
Access a line of credit to pay suppliers in over 65 countries. Borrow from $200,000 up to $7 million.
Prospa Business Loan
$5,000
$300,000
3 months to 3 years
3% origination fee
Small business loans are available from $5,000 - $300,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $6,000 is necessary.
ANZ Secured Business Loan
$10,000
$10,000,000
Up to 15 years
$600
Benefit from a low rate when you secure this loan with property and/or business assets. Loans from $10,000 available.
ANZ Unsecured Business Loan
$10,000
$1,000,000
Up to 15 years
$600
Apply for a loan from $10,000 with no security required and benefit from flexible repayment terms.
Westpac Business Loan
$20,000
$1,000,000
1 to 30 years
$0 application fee
Purchase a new vehicle, equipment or support your cash flow with a business finance solution from Westpac.
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Is my business eligible for a low interest business loan?

The business loans market is not subject to the same regulations as the home loan market, giving lenders a considerable amount of leeway when it comes to setting the terms of their business loan products. This is why lenders offering business loans rarely advertise their business loan interest rates and tend to consider applications on a case-by-case basis.

With this in mind, it is important to understand that the terms of a business loan offered to one applicant can be very different from those offered to another. Lenders are always looking to mitigate their perceived risk and will not hesitate to charge a higher interest rate to a business they perceive as high risk.

Your business will be more likely to be eligible for a low interest business loan if you can satisfy most of the following criteria:

  • A healthy business profile, including a solid trading record and a clean credit history
  • High annual turnover and healthy cash flow
  • Low-risk or income-producing loan purpose, such as to purchase standard commercial property rather than to pay off a tax debt or to consolidate other loans
  • Solid profile of valuable business assets
  • Offering security for the loan, particularly residential property

What other costs do I need to consider with a low interest business loan?

While the interest rate charged on a business loan is an important consideration, it can't be the sole determining factor.

Consider all costs associated with a business loan when weighing up your options, including loan establishment fees, monthly service or account-keeping fees and early repayment fees, to compensate the lender for the interest they would have received had you not paid the loan out earlier.

When comparing business loans, it is important to choose a loan that suits your individual needs. While a low interest rate can be enticing, it's probably not a good idea to choose a fixed rate loan with high early repayment penalties if you're planning on paying out the loan early. Similarly, a low interest rate quickly loses its shine when accompanied by high monthly account-keeping fees.

How is interest calculated on a low interest business loan?

Not all business loans are created equal, and not all interest rates are calculated in the same way. When comparing low interest business loans, consider the different ways that interest can be calculated:

  • A fixed interest rate is a set rate applied to the repayments over the life of the loan.
  • A variable interest rate is a rate that may change – either upwards or downwards – over time, depending on the strength of the economy and the movements of the cash rate set by the Reserve Bank of Australia (RBA).
  • An annualised percentage rate (APR) is a standardised percentage rate that includes the interest rate applicable to the loan as well as all ongoing fees and other charges.
  • A factor rate is an interest rate expressed as a multiplier rather than a percentage. For example, a factor rate of 1.3 applied to a loan amount of $10,000 will incur $3,000 in interest during the life of the loan, with the total cost of repayments being $13,000 (1.3 x $10,000).
  • A discount rate is usually applied with an invoice factoring arrangement and refers to the percentage of the invoice that will be forfeited to the factor in exchange for early payment of the invoice. For example, applying invoice factoring to a $10,000 invoice with a discount rate of 5% will see $500 in fees paid to the factor.

How do I compare low interest business loans?

With so many things to consider, how should you go about comparing low interest business loans? Interest rates aside, what would make one business loan stand out above the rest? Just like any other loan or financial product, there will never be a single low interest business loan that is "better" than the others. The best choice for you will depend on your circumstances and could differ from the ideal business loan for another business.

When you're ready to compare low interest business loans, consider the following:

  • Interest rates. Not only is the rate itself important but also consider whether the rate is variable or fixed for the life of the loan.
  • Fees. Low interest rates need to be considered in conjunction with the fees charged on the loan. As we now know, a lower interest rate combined with high monthly fees can end up being more expensive than a fee-free loan with a higher interest rate. Be aware of establishment and early exit fees.
  • Security. Is the loan secured or unsecured? If you have an asset to offer as collateral for the loan – ideally residential property – you could be eligible for an interest rate discount.
  • Loan repayment frequency and loan term. Look for loan repayments that match your cash flow, and a term that suits the purpose of the loan. If you're looking to buy equipment with a three-year useful life, you won't want to be still paying it off in five years' time.

Questions we've been asked about low interest business loans

What documents will I need to apply for a low interest business loan?

You will need to prove to the lender that you can afford the loan. Requirements will vary, but in general you will need your most recent tax and financial statements, including profit and loss and cash flow forecasting, a detailed business plan, as well as personal information about yourself and any other directors or major shareholders.

Will my personal credit history be assessed?

When applying for a business loan, the lender will assess the credit history of the business as well as its directors and major shareholders.

Can I apply for a low doc or no doc loan?

If you're self-employed or operating a small business without a significant trading history, a low doc or no doc loan can give you access to finance without having to supply detailed financial records. While big banks are unlikely to offer a low doc or no doc business loan, smaller or independent lenders are more likely to consider lending to businesses who can't provide financial statements and tax returns.

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