Cheapest Business Loans Australia

Name: Cheapest Business Loans Australia
Creator: Savvy
Published: 2021-12-06T09:46:33+10:30

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Written by , updated on July 26th, 2023

How do I get the cheapest business loans in Australia?

To get a business loan with the lowest possible overall cost on the Australian market is quite a juggling act, and would involve a lot of different factors coming together. So what are some of the factors that would need to be in place?

Security or Collateral – Almost across the board, secured loans offer the best rates on the market. Having an asset locked in as collateral (meaning in the rare, worst-case scenario it could be sold to recoup the bank’s costs) means lenders can be a lot more relaxed about risk of losing money on the loan, which almost always translates into good interest rates.
Interest Rate & Fees – Lenders vary significantly in the interest rates they can offer on a loan. There’s also often a choice of variable or fixed rate interest, which can affect the cost of the loan over time. The fees can also vary a great deal, not just in terms of the amount but also what fees are charged – some lenders charge establishment fees or early repayment fees, others don’t.
The specifics of your business – Your lender will be assessing the state of your business and deciding what kind of rates to offer based on things like how old and established you are. More on this below.
Your business (and personal) credit rating – A lender assessing your business for a loan will routinely check both your business’ credit rating any your personal credit score. If both scores are particularly good, you could potentially get access to some of the best business loan rates on the Australian market – assuming the other factors all line up as well
The loan term – This is where the juggling act comes in. Secured loans almost always have the lowest rates of any loan, but secured loans normally have much longer terms than most other loans (generally starting at 5 years and going up). And longer loan terms increase the overall cost – because there’s more time for interest to accrue. As such, the cheapest loan would be a balancing act – a low interest secured loan, but with the shortest possible term to lessen the overall interest paid.

All of these factors contribute towards a loan with a low overall cost, and any one of them would help the process. But for the cheapest options on the Australian market – you'd need all of them to line up perfectly.

How can I compare different Australian business loans to find which option is cheapest?

The best way to start the hunt for the cheapest business loan if by getting online. Not only do interest rates vary widely between lenders, but they also change frequently – so it’s always important to be checking to see what the current lowest rates are, and who’s offering them. Fortunately, this is quite easy to do using an online comparison website – like Savvy. You can quickly compare a variety of business loans from some of Australia’s top lenders, and find the best rates on offer in a matter of minutes.

When comparing different loans, the base interest rate is important – a difference of a percent or two can mean a difference of thousands of dollars over the life of a loan. But don’t forget to also look at the fees, which can also make a big difference to how cheap a loan might be. Consider the comparison rate, which includes the most common fees into its total – but remember the comparison rate doesn’t include every fee possible, as some only occur in specific situations. Early repayment fees are a good one to take not off, as they affect how much it would cost to refinance the loan.

Also, if your loan has a variable interest rate, it’s worth thinking about if the current national interest rates are low or high. If they’re low, you should be prepared for loans to become more expensive if the Australian government puts the rates up – which can have quite an impact on a small business.

Types of business loan

Unsecured business loans

The most common type of business finance, unsecured loans enable businesses to access the funds they need without attaching an asset to the loan as security. Some lenders may allow you to borrow up to $500,000 and, because there's no collateral, offer same-day approval.

Secured business loans

If your business already owns valuable assets, such as property or expensive equipment, you may choose a secured business loan instead. These loans may increase your borrowing power beyond what an unsecured loan can offer and, crucially, typically come with lower interest rates.

Small business loans

Business loans don't always have to be worth hundreds of thousands. If you're operating a small business and need a boost to help you keep on top of your expenses or expand your company, you may be able to take out a loan starting from as little as $5,000 and unlock further capital.

Low doc business loans

Just because you don't have all the required documents for a standard business loan doesn't mean you're out of options. Low doc finance enables you to use alternative documentation, such as other business financials, in the application process to access the funds you need.

Lines of credit

A commercial line of credit allows you to draw from your loan account whenever your business needs access to their funds, instead of managing a lump sum and repaying it like a regular loan. This can add flexibility to your finance arrangement, providing money when you need it.

Invoice finance

Invoice finance presents another option to business operators looking to free up cash through outstanding invoices yet to be paid by their customers. Your invoice finance can either be invoice discounting or factoring, which present different options when it comes to your invoices.

Equipment loans

A common reason for seeking out a loan is to purchase commercial equipment. You can do this either with an unsecured arrangement or one with the equipment itself as collateral, with the latter potentially increasing your borrowing power and lowering your interest rate.

Supply chain finance

With this finance, when your business purchases product, your supplier provides an invoice which you send to your financier and pledge to repay by a set date. From there, your supplier sells the invoice to your financier at a discounted rate, while you repay the full amount to your financier.

Inventory finance

Under an inventory finance agreement, your lender pays your supplier directly for inventory, which allows it to be signed off and sent to you. From there, you can pay off your debt within a pre-determined period to your lender, which may be longer than the regular debtor period.

Overdraft facility

An overdraft facility is attached to an existing financial account belonging to your business, such as a transaction or savings account, and enables you to borrow up to a set limit after the account’s balance reaches zero. These overdrafts are repaid with interest, but only on what you use.

Cash flow loans

You may simply be in a position where your business needs a boost to its cash flow. If this is the case, there’s a range of stop-gap solutions which may be suitable for your situation, from standard unsecured loans to specialist cash flow loans, invoice finance or even an overdraft.

Why compare business loans through Savvy?

100% free service

It won't cost you a cent to compare a range of business loans through Savvy, enabling you to come back at any time.

Reputable lending partners

You can compare business loan offers through a range of trusted Australian lenders, giving you more confidence in the process.

Online comparison process

You can fill out our simple online form to generate business finance quotes tailored to your business' needs in minutes.

What factors affect the rates your business is offered?

How long has your business been in operation?

How visible is your business?

Do you have a strong customer base?

How solid is your cash-flow?

Is your industry growing, or in decline?

How long has your business been in operation?

How visible is your business?

Do you have a strong customer base?

How solid is your cash-flow?

Is your industry growing, or in decline?

Frequently asked questions about cheap Aussie business loans

Will offering a deposit get me a cheaper business loan?

A deposit isn’t always necessary, but it can potentially improve your situation with a lender. If you have the resources to offer one, it’s worth discussing with the lender how that might affect the terms of your loan. Obviously, it will depend on what resources you can spare.

In Australia, does it help me get the cheapest rates on business loans if I have a guarantor?

A guarantor will almost certainly improve the terms you get on a business loan – provided they’re someone in a strong enough financial position to cover the loan if for some reason you couldn’t. It’s a big responsibility though – and not something to be taken on lightly.

What can I do to maintain a good credit rating?

There’s a range if things that can help keep your credit in a healthy place. But some of the main ones include making sure bills and loans are repaid on time, not taking out multiple loans at once, and keeping the amount owing on your credit low – less than 30% of your limit, for preference.

Will it lower the overall cost of a business loan if I make extra repayments to pay it off quicker?

Potentially yes – provided your lender doesn’t charge excessive fees for early repayments. It’s worth checking what fees apply to early repayments when you’re still deciding on a loan, rather than finding out once you’re locked in. On the other hand, some loans actually encourage early repayments – with

Is it possible to get cheap Australian business loans in a hurry?

As a general rule, fast and cheap don’t go together well in the loan world. The most affordable loans on the market are generally secured business loans, and secured loans are notoriously slow to process. You can get fact loans with relatively low rates. But they won’t be the cheapest loan rates.

Is it possible to take out a business loan without any interest?

Not really – while government grants offer operators funds to dedicate to certain aspects of their business, interest-free loans aren’t generally an option. There are still many loans which charge an affordable level of interest and grant you the freedom to use the approved funds however you wish.