Compare Unsecured Business Loans Australia

Name: Compare Unsecured Business Loans Australia
Creator: Savvy
Published: 2021-12-16T14:37:01+10:30

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Written by , updated on July 26th, 2023

How should I compare unsecured business loans in Australia?

To get started with the process of comparing your loan options, you can utilise Savvy’s online comparison tools. These provide a quick and easy way to compare options based on your particular needs. Once you have found options in our rate table that suit your needs, there are a variety of important factors that you should look at, including:

Interest rate

Comparing the interest rates available to you from different lenders is always an important part of choosing the right loan. With unsecured loans, though, this can be even more crucial. Unsecured loans typically come with higher rates than secured loans, so you will want to ensure that you find a lender who offers an interest rate which is as low as possible in order to offset the increased interest costs associated with offering no loan security.

Fees

Because you may be paying higher interest on your loan, you should also do your best to minimise additional fees attached to your loan such as establishment fees, annual fees or early repayment fees. By finding a loan option that includes minimal fees, you will be able to reduce your overall costs, as well as give yourself more flexibility when it comes to considering early repayments on your loan.

Features

Extra features on your loan such as the ability to make free additional repayments or redraw your extra paid principal can be a useful option to have for your business’ flexibility. If these options are important to you, you should take note of whether lenders offer them and what fees (if any) lenders attach to these features.

Borrowing range

You can still borrow a maximum of $300,000 with an unsecured business loan, so for this reason you will need to ensure that you find a lender that can still offer you the right amount of funds for your business goals. Bear in mind that this does not necessarily mean that you need to choose the lender which can offer you the absolute most funds; only one that can meet your needs. This is important, as by borrowing more that you actually need, you can subject yourself to increased interest costs and possibly more fees, thereby harming your business’ cashflow. This borrowing limit is much lower than secured business loans, which can range into the tens of millions in some cases.

Approval speed

If you are in need of fast access to funds, the amount of time a lender will take to process and approve your application will be important to you. By considering lenders who can offer a quick turnaround on loan applications, you might be able to fast-track your business activities and reach your goals sooner.

How do I compare unsecured business loans to different finance options in Australia?

There are several alternative finance options in Australia which you can compare to an unsecured business loan, including business credit cards, overdrafts and lines of credit.

Secured business loans

These are the most similar in structure to unsecured loans, as the only difference stems from the fact that the borrower supplies security for their loan. This means that secured business loans are able to be offered at a much lower interest rate and with less substantial fees, as well as expanding the borrowing range into the tens of millions and term length up to ten years.

However, these loans are more difficult to get approved and are slower due to the need for the lender to assess the suitability of the security, meaning they could take weeks to be processed. Also, for many businesses, supplying an asset as security simply isn’t an option, so unsecured loans are more accessible across the board.

Business credit cards

Business credit cards are best suited for use in making small purchases when businesses do not have the cash on hand but will be able to make their repayments quickly. This is because credit card spending limits are lower than the amount you would be able to access from a regular business loan, and the interest rates applicable to your credit account are higher also.

Business overdrafts

Business overdrafts allow you to make purchases using your business transaction account even when your balance is $0 up to a certain limit. This type of credit can act as a useful buffer to help you to cover costs while waiting for cashflow to improve or for invoices to be paid. With an overdraft, you will only pay interest on what you access, at a rate that can sometimes be more favourable than a business loan. Bear in mind, though, that these are often charged at a higher interest rate and have lower spending caps than unsecured business loans, making them less suitable for larger sums of money.

Business line of credit

Similar to an overdraft, a business line of credit allows you to access finance whenever you need, but is intended to cover medium to long term costs such as investments or improvements to your business. Once approved, a line of credit can be useful in the sense that you can operate your business knowing that you can access these funds if you need to and will not need to go through the loan approval process before accessing this credit.

It is also important to note that while a business line of credit can be helpful in some regards, you will need to pay ongoing costs in the form of monthly fees even if you don’t access the account in a given month. This means that lines of credit may not be as suitable for covering your more significant business costs compared to unsecured business loans.

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.

Frequently asked questions about comparing unsecured business loans

How much will I be able to borrow with an unsecured business loan?

The amount that you will be able to borrow will depend largely on your financial history and your current financial situation, as well as the policy of different lenders. Facets of your business’ financial situation that can affect this include the age of your business, its current credit rating, cashflow, book value of assets and more. As a rule, though, unsecured business loans can offer borrowers a borrowing range between $2,000 and $300,000.

Over what period of time will I need to repay my business loan?

Different lenders will have different policies regarding loan terms, and available loan terms will also vary depending on your particular needs and agreement, but you should expect to be able to access loan terms of between three months and three years. Consider what sort of loan term will be best suited to you based on the total amount you will be borrowing and what your monthly repayments will be under different loan terms. Try to find a loan term that offers you monthly repayments that are well within your capacity to handle.

Which lenders can offer me the fastest turnaround for unsecured business loans?

Generally, online lenders who specialise in offering fast, accessible business loan solutions can offer the fastest turnaround for this type of loan. While these lenders can be very appealing for those who wish to access funds quickly, they do tend to apply higher interest rates to their loans than more traditional, larger lenders such as major banks or credit unions. You should bear this is mind when weighing up whether you should prioritise speed of approval or overall loan cost.

If I take out a business loan in Australia, what can I spend the funds on?

Whatever you wish – business loans can be taken out by all sorts of owners for a variety of reasons. You might need a loan for your medical practice, which can be distributed across employee wages, ongoing bills and even new equipment. Restaurant owners looking for finance may wish to add to their general cashflow and fund a shop fit-out, both of which can be done with a single loan. As long as it’s for business purposes, your unsecured business loan can be used however you wish.

Can I get a government grant instead of an unsecured business loan?

Government grants offer an alternative to loans for you to access funds for your business, provided you can meet eligibility requirements and your application is strong enough. Grants such as the New Enterprise Incentive Scheme (NEIS) and various state schemes offer opportunities for both new and existing businesses to access capital to help fund operations. Note that winning grants can be a competitive process and is not guaranteed, and not every business will qualify for a grant, so these should not always be relied upon as a primary means of funding.

What will I need to apply for an unsecured business loan?

To apply for a business loan, you will need to provide a few documents. These include an official government-issued photo ID such as a passport or driver’s license, a summary of your current finances such as six months’ worth of bank statements, your business’ ABN or ACN, and a breakdown of your business’ finances such as a cashflow statement.