Compare small business loans up to $1,000,000.
If you're looking to fund the growth or expansion of your small business, there are several loan options available to help you reach your financial goals. Finding the best small business loan can be difficult, so let's take a look at how to compare your finance options and find the loan that's right for you.
How much can I borrow with a small business loan?
As a small business owner, you can generally borrow from $5,000 to $250,000, though some lenders will allow you to borrow up to $1,000,000. The amount you can borrow will generally be tied to the size, age and revenue of your business.
Is my small business eligible for a loan?
Lenders consider a number of factors to see if you're eligible for a small business loan. While the exact criteria will vary from one lender to the next, the decision is based on things such as:
- Turnover. Your small business may need to have a minimum amount of turnover to be eligible for a loan. Depending on the lender, this could be calculated on a yearly or monthly basis. While one lender might require your business to have an annual turnover of at least $100,000, another might need to see evidence of monthly sales exceeding $10,000.
- Age of business. Your business may need to have been operating for a minimum period of time in order to be considered for a loan. Established businesses are considered a much lower lending risk than new startups.
- Business financials. In addition to turnover, lenders will request a range of other financial information about your small business. This could include details of your existing bank accounts and loans, previous tax returns, profit/loss statements and future financial projections.
- Credit profile. The lender will investigate your business’s credit history and will also check all directors’ credit profiles. If your credit history is less than perfect, a bad credit business loan may be the solution.
How much does a small business loan cost?
There are three factors you need to consider when calculating the total cost of a small business loan:
- The loan amount. The more you borrow, the larger your repayments.
- The interest rate. The higher the interest rate that applies to the funds you borrow, the more the loan will cost you to repay. Different business loans may offer either fixed rates, which remain the same for the term of the loan, or variable rates, which change in line with market rates.
- Fees and charges. You'll need to read the fine print to find out what upfront and ongoing fees apply. These include application and establishment fees, as well as ongoing monthly or annual charges.
How to get a small business loan
Once you've found the best small business loan to meet your financial needs, you can apply using the following steps:
- Apply online. Most lenders will let you apply online. You'll generally need to provide your name and contact details, plus your ABN and some other basic business information. You'll also have to supply detailed financial information about your business, such as turnover, profit/loss statements and future cash flow projections.
- Get approved. If you're successful, you will receive a quote from the lender with the terms of your loan, which can then be accepted.
- Receive and use the funds. Processing times vary between lenders, but it's often possible to access the funds you need on the next business day. These can then be used according to the needs of your business.
- Manage your repayments. You will need to factor your loan repayments into the operating costs of your business and ensure they are paid on time to avoid costly fees.
Mistakes to avoid
Choosing the wrong finance option. There are benefits and drawbacks to all business loan types. Picking the wrong loan for your situation could be costly to the success of your business.
Not having your application prepared. You will need to provide specific details of your business as part of your application. If you fail to provide them, you risk your loan being delayed or even rejected altogether.
Choosing the wrong loan terms. It's important to understand your financial needs when choosing how much to borrow. If you end up borrowing too little, you may struggle to finance your business. If you borrow too much, you may be stuck making larger repayments than necessary.
What types of small business loans are available?
Whatever your financing requirements, there’s a wide range of small business loan options available:
- Line of credit. You can get access to a revolving line of credit and draw on your account balance up to an approved limit. You only need to pay back the money you borrow (plus fees and interest) rather than the entire approved amount. A line of credit is worth considering if you need to better manage your cash flow or cover an unexpected expense.
- Business overdraft. A business overdraft is attached to your business banking account and lets you overdraw on your account up to a specified limit. This can help you better manage cash flow for your small business, but does come with fees attached and monthly interest charges on the overdrawn amount.
- Term loan. A term loan allows you to borrow a single lump sum which you must then repay over an agreed period of time. Available with fixed or variable rates, these types of loans are suitable when you have a fixed purchase price or expense when you know the price in advance.
- Invoice financing. Instead of waiting weeks or months for your invoices to be paid, invoice financing allows you to use outstanding invoices to provide cash flow for your business. When you generate an invoice, you can sell it to an invoice financing company, which pays a large percentage of the invoice amount straight away and keeps a small percentage as payment for itself.
- Business credit card. Business credit cards work in much the same way as personal credit cards, with the key differences that you can add multiple cardholders and your plastic is used for business purchases. They’re very handy for meeting your immediate cash flow needs and can also offer benefits through rewards programs, but they can also be expensive if you don’t pay off your purchases during the interest-free period.
- Business vehicle finance. This is a secured loan that can be used to buy a vehicle for your small business. Vehicle leasing is also available and you may be able to take advantage of tax benefits depending on how the financing arrangement is structured.
- Equipment lease/finance. There are multiple equipment finance options available to help you purchase or lease business equipment. This includes commercial loans, equipment hire purchases, finance leases and novated leases, so you'll need to compare their pros and cons to determine which option is right for your business.
- Peer-to-peer business loan. Peer-to-peer lending allows you to access business financing from a single investor or a pool of investors. These loans are easy to apply for and offer an alternative source of funding to traditional banks, but you'll still need to satisfy a range of eligibility criteria and pay fees to the peer-to-peer broker that sets up the loan.