The features and benefits of small business loans
Business loans come in all shapes and sizes, from small cash advances of just $5,000 up to $500,000 or more without the need for any security.
Unsecured business loans require no assets to be used as collateral, meaning your business’ valuable equipment or even your home remain separated from the loan.
You can opt for a short-term loan as short as three months in length or arrange an agreement to repay your financing over as long as five years, ensuring you can stay comfortable with repayments.
There are plenty of lenders in the market vying for business and can offer more affordable interest rates and lower fees to the right borrowers to help you save.
Your online business loan application will only take a matter of minutes to complete, with a simple application form on your lender’s site and a few documents enabling you to send it off quickly.
Your business doesn’t need to be well-established by the time you apply for your loan: we’re partnered with lenders who can offer to businesses with just six months’ worth of trading.
If you want a more flexible source of funds that you can draw on whenever you like, and only pay interest on what you use, a business line of credit might suit your needs.
Types of business loan
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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?
Top tips for maximising your small business loan approval chances
One key area that lenders look to when assessing loan applications from small business owners is their business’ credit score. Depending on the type and age of the business that you own, they may also look to your personal score. By boosting this score, you give yourself a greater chance of approval for a greater sum and lower rate. You can do this in several different ways, such as paying bills on time and lowering business credit card limits.
It seems simple, but it’s true: the more revenue you generate as a business, the more likely you are to be approved for a business loan. This is because successful businesses and those with consistently high turnover are considered safer and lenders will be more willing to approve them, particularly for greater sums and at lower rates. If your business is earning a comfortable amount each month and has been doing so for a sustained period, you’ll stand the best chance of approval.
Some lenders will ask for a business plan as part of the application process, which forecasts your business’ revenue over the coming months or years. By preparing a thorough plan which clearly demonstrates how your business will achieve these predictions, rather than simply stating you expect to generate a certain amount of cash, you can increase your lender’s confidence in you and boost your overall approval chances.
One of the simplest ways to increase your chances of small business loan approval in Australia is to have a record of repaying business loans. This is especially the case if you’ve done so previously with the same lender, as ease of approval is increased significantly when you’ve established a relationship with a particular financier. If they were happy with the way you serviced your debt previously, you’re more likely to be approved on favourable terms this time around.
Frequently asked small business loan questions
Helpful business loan guides
Still looking for the right finance for your business?
Explore a range of business loan options suitable to your financing needs and apply online through Savvy today.