No Deposit Business Loans

Get approved for your business loan without paying a significant lump sum upfront. Compare your options with Savvy.

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, updated on July 26th, 2023       

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When looking to access finance for your business, no deposit business loans allow you to avoid the need to put up a large upfront sum. This offers you the opportunity to make the important commercial purchase that you need to without the hassle of having your surplus capital tied up as a deposit. In this guide, you can find the answers to key questions surrounding this type of business finance, as well as learn more about how to compare your options to make the best decision for you and your business.

What are my no deposit business loan options?

When you are looking to take out a business loan without putting up a deposit, you will be happy to learn that you’ll rarely be required to supply one. It’s important to be across the ways that you can get a 100% financed loan, with some of your options including:

Unsecured loans

The most straightforward loan option, depending on your circumstances, will likely be an unsecured loan. These options are appealing, as they don’t require you to attach any of your existing assets such as residential or business property to your new loan and are accessible for a broader range of applicants. While an unsecured loan will most likely not offer you access to the maximum borrowing range possible and might mean paying slightly higher interest rates, often the more lenient application process and flexibility these loan types offer make them the primary choice for would-be borrowers.

Secured loans

Similar to regular loans which can be secured with assets or guarantors, your business loan can be also. Essentially, most lenders will offer you the chance to offer an asset or combine multiple assets as collateral for your loan. By providing a security that reaches a high enough value, your lender might deem your loan to have been sufficiently de-risked to offer you a better interest rate or greater borrowing range for your loan. Your options for securing your loan can include your current assets, such as residential or business properties, machinery and other equipment. Alternatively, you can opt for a guarantor, who takes on the legal responsibility for servicing the loan should you become unable to.

Equipment or vehicle finance

Some lenders, such as specialised business equipment financiers, can offer no deposit loans to cover purchases of important equipment such as vehicles or machinery. These arrangements will generally involve using the purchased asset as security for the loan, but can be structured in a way that suits your needs in terms of your repayment schedule. The interest rates applicable to these loans tend to range from 4% to 8% depending on the circumstances of the business owner, how much security can be offered for the loan, and the particular piece of equipment your loan has funded.

Business credit cards

Business credit cards serve as an alternative to a regular loan. These afford the flexibility to have credit ‘on standby’ to be accessed for business purchases when you need it, which can be a useful safety net.
It is worthwhile noting that credit cards do incur higher interest costs than most regular loans, meaning they’re not suitable for large business purchases or investments without paying a substantial amount in interest.

What should I think about when comparing no deposit business loans?

When comparing your no deposit business loan options, there are some factors that should bear more weight than others in your decision making. Some of the most important points of comparison to keep in mind include:

Interest rate

Because you are providing no deposit whatsoever for these loans, the interest costs that you will need to pay for the life of your loan can be higher. For this reason, it is important that you try to find a loan that can offer you the lowest rates possible in order to reduce these costs. To illustrate the difference a lower rate can make, we can use an example:

Sarah takes out an unsecured business loan to cover a $100,000 business expense. The interest rate applicable to this loan is 6% and the loan term is 5 years. Sarah makes no extra repayments to her loan, and once she has paid it off after 5 years, she has paid $15,997 in interest costs.

If Sarah takes out the same loan, except she is able to find a lender which will offer her a 5% interest rate over the same period of time, she will only pay $13,227 in interest costs over the life of her loan.

This difference represents an additional $2,770 in free cashflow available to Sarah’s business at the end of her loan term, which she can then allocate how she chooses, or use to make extra repayments throughout the course of her loan in order to further reduce her interest costs and pay her loan off more quickly.

Fees

Extra costs such as establishment fees or annual administration fees for your loan can impact your bottom line. Some lenders will charge an establishment fee as a flat sum, or in the area of 2% to 3% of your total loan amount, which when applied to larger loans can be substantial. By finding a lender who charges minimal or zero establishment fees, you will be able to save money on the cost of your loan overall, giving your business greater flexibility to allocate funds how you so choose.

Security

Before beginning your search for your no deposit business loan, you should assess whether you are in a position to offer any form of security on your loan. If you are not, or you would simply prefer not to, you should narrow your search down to lenders who will not require security in exchange for a loan on 100% finance. If you do have some form of security to offer, you should identify lenders which will offer you the greatest benefits in exchange for this security, such as who can offer the largest reduction in interest rates or increase in borrowing range.

Business requirements

Some lenders will require your business to have been active for a certain amount of time (6 to 12 months) or generated a minimum amount of monthly cashflow (at least $5,000 per month). Because of this, you will need to compare these requirements between lenders to ensure that you will be able to meet them.

Types of business loan

Why compare business loans through Savvy?

Need to know more about no deposit business loans?

Can I get a no deposit business loan for a new business?

Yes – there are plenty of finance options available to start-up and new businesses. Unsecured business loans are the most common for start-ups, as these businesses typically don’t have the assets required for security at that stage. Given that start-ups have fewer available documents and tend to be inherently less secure, they can attract higher rates and lower borrowing caps.

How can I improve my chances of getting a good deal for a new business loan?

If you are an individual who is looking to take out a no deposit loan to start a new business, the best thing you can do to get a good deal on your loan, outside of providing security, is to ensure that you have a positive credit history and strong financial circumstances. You can do this by making sure that you have paid all of your past outstanding bills, debts and rent on time, and can provide evidence of a fiscal discipline with your personal finances such as budgeting smartly and making regular savings.

What kind of interest rates will I need to pay for my business loan?

The interest rates applicable to no deposit loans vary greatly depending on the financial circumstances of the business in question, whether the borrower can offer security, and the lender in question. At the very least, you should expect to pay 5% for a secured loan to your established business and at the very most (in extreme circumstances) you could pay up to 25% for an unsecured loan for a new, unproven business with little evidence of financial strength.

What sorts of purchases can I make with a no deposit business loan?

The purchases you can make with your no deposit loan depend on the type of loan you take and out and the terms of your loan. For example, if you specifically take out an equipment and vehicle loan, you will be obligated to spend your loan on purchasing said equipment, as this is what your lender would have agreed to as security for the loan. If you take out a more general loan, you will be free to use the funds to cover your general business expenses wherever you see fit.

How am I able to invest my business loan funds?

Provided you invest your loan funds back into your business or use them to make a necessary purchase, there are essentially no restrictions on how these loans can be used. For instance, you could take out a loan to buy or invest in a microbrewery or another business, purchase inventory for your business to take advantage of a particularly good deal on stock or renovate and fit out your premises if you have a storefront. You might also be able to cover outstanding tax debts with a loan

Can I pay off a no deposit business loan early?

As with all loans, if your lender offers you the ability to make early repayments as a feature of your loan agreement, there is no reason you cannot repay your loan ahead of schedule. Before paying off a loan early, though, it is worth considering whether the percentage return you could achieve by using your surplus capital in your business’s cashflow might outweigh the interest costs of maintaining your loan for its entire term.

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