A quick guide to small business loans
When it comes to fueling growth or managing operational expenses, small business loans come into play as one of the most practical solutions. These loans are specifically designed to meet the financial needs of small businesses.
They are typically provided by banks, credit unions, and online lenders, and they come in various forms, such as term loans, lines of credit, and invoice factoring. Your business might utilise them for numerous reasons, like expanding premises, purchasing inventory, or improving cash flow. Essentially, they give your business the necessary financial boost to thrive and grow.
Here's an overview of what a Small business loan typically offers:
- Loan amounts from $2,000 - $2,000,000
- Flexible loan terms: 3 months to 5 years
- repayment frequency: weekly, fortnightly, or monthly
- Fixed interest rates from 7.99%
- Interest rates customized to your financial profile
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This guide is broken down into the following sections. Click a link if you want to skip ahead.
What can I use a small business loan for?
The versatility of a small business loan is what makes it such a vital tool for many business owners. You can use it to finance virtually any aspect of your business. Whether you're looking to purchase new equipment, finance an expansion, hire additional staff, or even manage day-to-day expenses during slow periods, a small business loan can be a lifeline. It's important to remember, though, that while the freedom is there, the loan should be used wisely for your business's betterment.
Inventory Purchase
Small business loans can be used to purchase inventory, particularly in preparation for busy seasons.
Working Capital
Loans can provide a cash cushion for daily operational costs like payroll, rent, and utilities, helping businesses maintain smooth operations during lean periods.
Marketing and Advertising
To attract more customers and expand brand awareness, businesses can use loans to fund marketing and advertising campaigns.
Debt Consolidation
If a business has multiple debts, a small business loan could be used to consolidate these into a single, more manageable payment.
Emergency Fund
Small business loans can be used to establish an emergency fund to cover unexpected expenses or shortfalls.
Equipment Purchase
Businesses can use loans to buy necessary equipment or machinery that helps increase operational efficiency.
Expansion
When businesses are ready to grow, small business loans can fund physical expansion like a new location or larger premises.
Hiring New Employees
Small business loans can cover the cost of hiring and training new employees as the business grows.
Technology Upgrade
Upgrading to new technology, such as software or hardware, can be financed with a small business loan.
Product Development
Loans can fund research and development of new products or enhancements to existing ones.
How much can I borrow for a small business loan?
Small business loans in Australia typically range from $5,000 to $500,000, but the exact amount you can borrow depends on several factors. These include your business’s financial situation, credit history, annual turnover, and the length of time your business has been operating.
Lenders will assess your business's profitability, the consistency of cash flow, and your ability to repay the loan when determining your borrowing limit. They might also consider the specific purpose of the loan, as certain uses such as purchasing equipment or property might qualify for higher loan amounts.
Furthermore, the type of small business loan you apply for can influence the amount you can borrow. For example, unsecured business loans usually have lower limits as they carry more risk for the lender, while secured loans, where an asset is used as collateral, often have higher borrowing limits.
It's important to remember that while larger loans can provide the capital to help your business grow, they also come with bigger repayments. As such, it's vital to ensure your business can comfortably manage the repayments before applying for a loan of any size. Always aim to balance your need for capital with the practicality of repayment to maintain the financial health of your business.
Business Loan Repayment Calculator
To estimate your monthly repayments and the total cost of the loan, input the loan amount, loan term and interest rate into the calculator below. This helps you plan your budget and choose the most suitable loan terms.
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Am I eligible for a small business loan?
Understanding your eligibility can help you make informed financial decisions.
Lenders consider several factors when assessing your eligibility, including your credit score, income, debt-to-income ratio, age, residency, and required documentation.
While meeting the eligibility criteria doesn't guarantee loan approval, having a good credit score, stable income, and a positive financial profile significantly improve your chances.
You are eligible to apply for a small business loan if you:
- ✔Are over the age of 18
- ✔Are an Australian citizen or permanent resident
- ✔Have a regular source of income sufficient to meet the repayments
How to Apply for a small business Loan
Applying for a small business loan is straightforward and takes only a few minutes. Simply fill out our online form with some basic details, and you'll be on your way.
Once we receive your information, a representative will reach out to help you explore loan options from over 50 trusted Australian lenders.
If you're eligible for a small business loan and are satisfied with the initial quote, here's what you’ll need to prepare:
- ✔ Passport or driver’s licence
- ✔ Proof of income and expenses (e.g., payslips, bank statements)
- ✔ Details of any current debts or loans
How to Find the Best small business Loan for Your Needs
Choosing the right small business loan involves understanding key factors like interest rates, fees, and repayment terms. Each aspect can impact the total amount you'll pay, so it's vital to make an informed decision.
Interest Rate
Lower interest rates reduce the total cost of the loan. Take time to compare rates from various lenders to secure the best deal.
Comparison Rate
Unlike the interest rate alone, this includes fees and charges to give you a clearer understanding of overall costs.
Early Payout
Find out if your loan allows early repayments without penalties, as this can save you significant interest costs.
Fees
Pay attention to application, ongoing, and early repayment fees. Opt for a loan with competitive and transparent fee structures.
Loan Term
Shorter terms mean higher monthly payments but less interest overall, while longer terms reduce payments but increase total costs.
Still have questions about small business loan?
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