Compare low rate business loans
Many businesses find themselves in need of a loan at one point or another, whether it’s for getting established, expanding or just covering costs during a shortfall. Learn more about how to find small business loan with the lowest interest rates and how to compare them all in one place with Savvy.
|Lumi Unsecured Business Loan|
Boost your business with fast hassle-free funding from Lumi. Apply online in five minutes without harming your credit score and get funds in as quickly as 24 hours. For a limited time: Business Loans with No Repayments for the first 6 weeks. T&C apply.More details
|Lumi Lux Rate Reducing Business Loan|
Lumi Lux™ is an innovative rate-reducing business loan that rewards customers with good repayment histories and no contractual breaches throughout their loan term by dropping interest rates by 25 basis points (0.25%) every six monthsMore details
|Valiant Finance Business Loan Broker|
Valiant is Australia’s leading business loan broker with a network of over 80+ lenders. Apply for a business loan between $5,000 and $1 million and get approved in as little as 24 hours.More details
|ebroker Unsecured & Secured Business Loans|
Compare, find and match fast to over 80 bank and non-bank lenders accessing much needed working capital from a unsecured business loan.More details
Disclaimer: Savvy is not advising or recommending any particular product to you. We provide general information on products for the purposes of comparison, but your personal situation or goals are not considered here. Although we try to make our comparisons as thorough as possible, we do not have information on all products on the market on our site.
You should always consult a given offer's PDS or further documentation in the process of deciding on which loan to choose, as well as seeking independent, professional advice. If you decide to apply with one of the lenders listed above via our website, you will not be dealing with Savvy; any applications or enquiries will be conducted directly with the lender offering that product.
Low-rate business loans explained
How do I get a low-rate business loan?
There are a number of different factors that determine whether you get offered high or low interest rate for a small business loan. Some are easier to control than others, but all of them play a part in the process. These include:
Lenders generally regard loaning money to a large, well-established company as a safer choice than lending to a small one, and that often means they’re willing to offer better terms. However, a small business that’s been successfully trading for decades might still be offered better rates than a larger start-up company founded in the last few years. A stable and successful business is generally more able to repay a business loan and, as a result, it’ll generally be offered lower interest rates. It’s important to keep good records to show how your business is tracking.
If you’re willing to offer some collateral on the loan – that’s a large asset of some kind, such as a property or vehicle – that can improve your rates significantly and can help you secure a cheaper loan. If things go bad and you can’t make your repayments, your lender can sell your asset to make some of their money back. This is called a secured loan. An unsecured loan tends to have higher interest rates and lower amounts, although it’s generally quicker and easier to get approved.
Type of lender
For a secured loan, the type of lender can also play a significant factor in the rate you get for the loan. In Australia, banks are often able to offer better rates for a secured business loan than some of the smaller operators. The catch is that it’s often a lot harder to get approval for a loan with a big bank – the process can take weeks, requires lots of information about your business and its finances and your odds of getting rejected are generally higher. In Australia, smaller lenders are more flexible when it comes to their lending criteria and can turn an application around in a few days, with their rates for unsecured loans often on par with the bigger banks.
Another factor that might affect the interest rate over the life of your loan is the type of interest you’ve gone for. Fixed rate interest is locked in at a certain rate and isn’t going to change. Variable rate interest goes up and down with the market and are more flexible when it comes to additional and early repayments, but their non-locked rate can mean you end up paying more overall if rates rise throughout the term. So, a variable rate will be far better if interest rates go down during the life of the loan, but fixed interest is better if interest rates rise. It’s worth keeping an eye on what Australian interest rates are doing as a whole before you decide what kind of interest you want to lock in and compare your options.
Some lenders might apply special conditions to a loan that might improve the rate a little. This might be something like requiring you to pay off a certain debt, provide specific documentation of some kind, or avoid certain activities as a business. If they can place restrictions on you that lessen the risk, they might offer a better rate if you accept those conditions. It’s worth remembering, though, that the lender is more interested in your business making its repayments than in growing and expanding. You’d want to think through the consequences of accepting any special terms and conditions carefully.
How does risk affect whether I get a low interest rate on a business loan?
No matter which kind of lender you’re going with, the main equation that’s going to affect both your chances of getting approved for a business loan in Australia and how good the terms of the loan are is risk. In loan terms, risk is the likelihood that the lender will lose money on the loan, generally because you can’t make your repayments. All lenders will charge interest on a business loan, but whether the rate is low or high depends on how much risk they think is involved.
Lenders use higher interest rates to offset risk. If they’re offering a loan to a customer with a one-in-twenty chance of the loan turning bad and not being repaid, you can offset that risk by charging other customers a little bit more – the nine loans that do get repaid will cover the shortfall of the one that doesn’t.
As such, most lenders will be making decisions on how much interest to charge you based not only on how much need to charge to stay in business, but also on how much of a risk it is to loan your business money. Most of the things you can do to improve the interest rate on a loan really come down to reducing the risk to the lender.
Pros and cons of an unsecured business loan
Generally an unsecured loan comes with fewer rigorous checks than a secured one, meaning the application process is a lot simpler and less painful – particularly with some of the smaller lenders.
The simpler application process means unsecured loans can have a much quicker turnaround. Many smaller operators can have a loan approved within 24 hours.
No collateral required
An unsecured loan doesn’t require an asset to be put on the line – which is handy if you’re just starting out and don’t have much in the way of assets. It also removes the risk of losing your asset.
Assets are freed up
Because your assets aren’t tied up as security on a loan, you’re not restricted what you do with them – you can move to a smaller property to free up some capital, or upgrade your significant equipment without the bank being involved.
Because they come with more risk for the lender, they can’t offer interest rates as low as a secured business loan.
Unsecured loans are generally intended to be paid off a lot quicker at one to two years, rather than ten to 20. This means less interest over the life of the loan, but higher repayments.
An unsecured loan generally offers a lot less money (dependant on your circumstances). This can still be around $200k – $300k to the right customer, though.
Still dependant on credit history
Even though the checks are less stringent than with a secured loan, they’ll still check your credit history – meaning bad credit will probably still be a problem (unless you’re applying for a bad credit business loan).