Compare Business Loans In Australia: Reviews

  • Updated: May 7, 2021
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What’s in this Guide?


    Small Business Loans – Unsecured Business Loans


    Unsecured loans or fast business loans are a good option if you are looking for a loan fast or if your business does not have suitable assets to use as collateral. As the loan is not secured, your business should have a decent business credit score, an ABN, have at least 3 to 12 months trading history and turnover of $5000 to $20,000 a month.

    If you meet these the lender’s eligibility criteria then you can access working capital from $2,000 to $1 million which can be repaid from 1 to 36 months to solve your funding needs

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    Small Business Loans – Line of Credit


    A business line of credit a good option if you are looking for flexibility. These type of loans differ from traditional loans, as you only pay costs of the amount that you draw from the credit facility.

    Using a credit line can lead to savings as you are not paying for funds you do not withdraw.

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    Small Business Loans – Merchant Cash Advance


    A business line of credit a good option if you are looking for flexibility. These type of loans differ from traditional loans, as you only pay costs of the amount that you draw from the credit facility.
    If you make your sales through EFTPOS, debit or credit sales then a lender that offers a Merchant Cash Advance can be an option.

    With this type of advance, the lender claims a small portion of your daily electronic sales toward repayment of the loan. This can benefit your business as loan payments are matched your fluctuating daily or seasonal turnover.

    This type of loan is best if your business is in the retail or hospitality industry as merchant finance require all your sales to be by electronic means.

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    Finding the right small business loan in Australia for you


    Loans are a useful means to help your businesses operate and grow. As a business owner, when applying for a loan, chances are you will want a loan that meets the following conditions:

    Fast Funding – A quick turnaround from application to approval to funding, sometimes all on one business day.
    Simple Loan Application – minimal paperwork for successful application
    Easy Approval – have few conditions such as credit scores and collateral requirements
    Low Business Loan Interest Rates – These are your main costs along with the establishment fee or upfront fee
    Flexible loan terms – The loan amount and the repayment period can be tailored to your needs

    If you are looking to grow your business and lack the resources to finance it yourself, one option is to get a loan.  When choosing a business loan for your small business, it is beneficial to understand the different types of loans options available so that you can find the right business loan for you.

    Australian businesses are fortunate to have a wide of ways to obtain business finance beyond traditional bank loans from lenders such as Westpac, NAB, or ANZ. These loans can be ‘unsecured business loans’ or ‘secured business loans’ and can be a ‘lump-sum’ or ‘line of credit’ so it is worthwhile being familiar with your loan options.

    This ‘compare business loans in Australia’ review guide looks at the most popular types of business loans available in Australia so you can find the best loan and lender for your needs.


    Before you apply for a loan


    Before you apply for a loan, it helps to determine exactly what you need the loan for. This will help you have a clear mind what is the right type of loan for you.

    In this ‘compare business loans in Australia’ review, we recommend asking yourself the following question before taking on any loan:

    1. How do you intend to use the funding?
      • What is the purpose of the loan, some loans may serve your needs better
    2. How much do you need?
      • Knowing how much you need and how you will use it will help you find the right lender and loan type
    3. What is the funding timeline?
      • Is the loan for short-term or long-term purposes.
    4. Can you afford the loan?
      • Draw a business plan and determine if you can afford the risk of taking on the loan.
    5. Does your business have a good credit history?
      • It is easier to get funding if your business is creditworthy. Some lenders will consider lending if you have poor credit but you may pay higher fees.
    6. How much will the loan cost?
      • It is worth shopping around and comparing different lenders. The best lender will hold an Australian credit licence with AFSL and be a member of AFIA. Lenders with AFIA should include SMART Box™ which a standardise pricing disclosure statement to help compare quotes from different lenders.
    7. Do you need the loan?
      • When you have asked yourself the above questions, you should be in a better position to ask yourself the loan is truly needed and will give you the necessary return on investment
    factors affect loan application

    All loans will be unsecured or secured. We look at what this means and then deep dive into the main types of loans available.

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    Unsecured Business Loans


    An unsecured business loan is simply a funding solution for your business that does not require collateral to secure the loan. This type of loan can be either a term loan, line of credit or cash advance.

    Unsecured loans a good option in the following circumstance:

    1. Your business has few (if any) assets. In place of security, the business owner or director needs to provide a personal guarantee.
    2. Your business needs funding fast: Quick application and approvals are common, sometimes on the same business day.
    3. You don’t want to deal with paperwork: SME lenders offer low doc loans and often don’t require paperwork as assessment is done online
    4. You want flexibility: SME lenders are able to be more flexible than bank lenders when it comes to lending amounts, loan terms and interest rates.
    5. You want choices – There are a greater number of SME lenders than bank lenders
    6. You want to build your credit score: Paying off unsecured loans builds trust with lenders and builds your credit score


    As a rule, unsecured business loans are not the best option in the following circumstances:

    1. You want to avoid high-interest rates: With no collateral, SME lenders are taking on greater risk so charge more interest
    2. Your business has poor credit AND poor cash flow: SME lenders will lend if you have poor creditworthiness but only if you have good cash flow
    3. Your business does not meet eligibility criteria: Startup businesses won’t qualify as lenders require the business to have been trading for at least 3 months and generate minimum level of revenue.


    Unsecured business loans are good options for any business-related activity:

    • Purchasing Inventory
    • Business expansion
    • Purchase or upgrade of Equipment/machinery
    • Employing new staff
    • Cash flow
    • Invoice financing
    • Invoice factoring
    What is a unsecured Business Loans


    Are unsecured loans expensive?


    Unsecured loans will usually be more than a secured loan. This is because the lender is taking on greater risk as you are not guaranteeing you will honour the loan debt through security. However, businesses owners consider this a good exchange in return for fast funding. Immediate cash flow ensures businesses do not miss out on opportunities or slowing operations while they wait for loans to be approved.

    Business with poor credit history may struggle to obtain an unsecured loan however many SME lender will consider your application if you can show the business is profitable or has good cash flow.

    Advantages

    • Fast Approval
    • Business does not need assets for collateral
    • Flexible repayment periods
    • Quick Application and processing
    • Fewer administration costs
    • More lenders to choose from

    Disadvatages

    • A personal guarantee from owner/director
    • Banks usually won’t lend without collateral
    • High-interest rates
    • No for business with no trading history (start-ups, new businesses)
    • The amount you can borrow can be restricted
    • High business credit score may be needed
    • Strict lending criteria



    Secured Loans (Equity Loans)


    A secured business loan is simply a funding solution for your business that requires the loan to be secured with an asset of some sort against the loan amount. This will usually be property but can vehicles, franchise licence, machinery or equipment or other assets of value.

    As this is an asset-backed loan, it is important to keep up with loan repayments or the lender may take ownership of the asset to recoup costs. You will find security is a requirement for a loan with banks and large financial institutions however some online lenders may also require collateral.

    Secured loans from banks will usually have a fixed term however some SME online lenders may be more flexible.

    What is a secured business loan


    Are secured loans expensive?


    Secured business loans will usually have a lower interest rate than an unsecured business loan. Use of collateral means the lender can use the sell the asset you use, to recover the loan in event of default. This means most of the risk rests with the borrower.

    The use of collateral is common for long term loans and where the business has poor credit.


    Comparing and reviewing the best business loans in Australia


    There is no shortage of options loans you can choose from. Below we review some of the most popular types of loans for Australian businesses. All these loans are available as an unsecured loan or secured loans however most non-bank lenders we review offer unsecured loans.


    Business Term Loans


    Business loans with a loan term are the most common type of loan. This type of loan is much the same as a personal loan however you can only use the loan for business purposes.

    Term loans mean you will receive the entire loan all at once as a lump sum. With this type of loan, you will a regular repayment over an agreed period of time.

    These type of loans come in a number of flavours including small business loans, short-term business loans, fast business loan, working capital loans, debt finance and term business loans. The only difference between these loans is the amount of funding the lender will make available and the length of the loan.

    What is a business term loan


    Interest rates and repayments

    Fixed Interest rates: When using fixed rates, the interest rate is the same through the repayment period. This type of interest is good for forecasting future payments but is likely to entail early repayment fees or penalties if you pay back the loan before the end of the loan term.

    Variable Interest rate: Sometimes called floating interest rates, these rates can fluctuate over the course of the loan. This means your repayments may vary with each payment schedule. Choosing a loan with variable interest rates mean you may be able to refinance your loan such as change the repayment amount. These type of loan usually don’t contain hidden fees such as early repayment fees.



    Business Line Of Credit


    A line of credit means you are able to access a credit facility for cash when you need it. You will only pay interest fees on the portion of the money you withdraw from the facility. Examples of lines of credit include bank overdrafts, buy now, pay later and credit cards.

    Lines of credit are popular where you need short-term finance. As the facility is pre-approved, you can quickly access funds(up to your limit) without needing to go through an approval process for each drawdown.

    This type of funding is popular for purchases that are too large for credit cards or buy now pay later financial services but too small for term loans.

    Interest rates and repayments

    Unlike term loans where you pay interest for the entire loan, a line of credit means you only pay interest on the fund your use.

    When making repayments, a line of credit can be rolling or non-rolling. A rolling line of credit means you can redraw any funds that you have paid back.

    What is a line of credit


    Asset Finance –
    Vehicle, Fit Out and Equipment Finance


    If you are looking to purchase assets for the business such as machinery, equipment, vehicles, commercial property, or even renovate or fit-out your premises then asset finance could be the right solution for you.

    Asset finance is an umbrella term to cover a range of finance options include commercial property loans, equipment finance, motor vehicle finance. Other types of asset finance include renovation and fit-out finance used to increase the value of your assets.

    The lending arrangement will vary depending on how you plan to procure the loan. Asset finance can come in 3 types.

    • Finance to purchase asset outright
    • Finance to hire asset with a view to purchasing in future
    • Finance to hire asset only (lender maintains ownership)


    Asset finance loans will usually cover a fixed term as the value of the asset is known in advance.

    Advantages

    • Little documentation needed
    •  Assets purchased can be used as collateral for the loan
    •  Asset be secured to get the loan even if you
    •  have a poor credit score

    Disadvantages

    • High-interest rates than other loan types
    •  The lender owns asset until the debt is cleared
    •  Commercial property loans have higher interest rates than residential home loans as they are riskier
    What is asset finance


    Business Overdrafts


    A business overdraft allows you to continue to access funds even after the business bank account funds are exhausted. An overdraft facility provides a safety net as it allows you to access more money than you have in your account. This makes overdrafts a good option for maintaining cash flow in an
    emergency or when you need short term funding.

    Examples of overdrafts that can be useful include:

    • Buying new stock
    •  Closing outstanding invoices
    •  Paying unforeseen business expenses
    •  Resolving supply chain costs


    Business bank overdrafts can either be secured or unsecured. If you use a non-bank lender then you will likely need to attach your bank account details with the lenders account so they can provide funds for the overdraft when you need it.

    Advantages

    • A good option for a seasonal business to cover cash flow shortages in low times
    •  Usually no early repayment fee
    •  Can be quick to arrange as the lender should have visibility to your bank details
    •  Pay interest only on the overdraft funds
    •  Can stop the overdraft when cash flow returns and debt closed

    Disadvantages

    • Interest rates are often variable making it hard to calculate borrowing costs
    •  High interest or penalty rates if you go over the overdraft limit
    •  Overdraft facility may be closed with no notice if not used correctly
    •  May have extra fees to extend the overdraft limit
    What is a business overdraft


    Merchant Cash Advance


    With a Merchant Cash Advance (MCA), the lender loans (or advances) you money in exchange for a percentage of your daily sales by EFTPOS, credit or credit cards.

    Sometimes called a business cash advance or merchant finance, this option is available to businesses that all their sales via card terminals. Tieing your repayment to sales means your repayment can be in line with seasonal cash flow. In other words, you will pay less when sales are low and more when sales are high.

    Examples of businesses an MCA is good for include:

    • Retails
    • Restaurants
    • Hotels
    • Online businesses


    An MCA usually requires no security so can be fast to get if your business meets the lender’s minimum qualification conditions

    Advantages

    • Fast Funding
    • No fixed repayment schedule
    • Repayment is matched to turnover
    • Good option if you have bad credit
    • No collateral
    • Convenience as repayment as automatically deducted from daily sales

    Disadvantages

    • One of the most expensive types of financing
    • Reduces your daily profits
    • Lose control over sales operations (can’t accept cash sales)
    • May required to use lenders preferred payment system
    What is a merchant cash advance



    Trade Finance – Import / Export Credit, Lines of Credit


    Trade finance is an umbrella term that covers all lending products that help facilitate international trade. It is a form of short term credit to import or export goods or make international payments and is popular with exporters, importers, wholesalers, distributors and sometimes companies with staff or
    contractors overseas.

    This type of finance generally works on a confirmed order basis. Taking out a loan allows you to commence with the actions you need to complete the order as soon as possible. Import transactions can be tough on cash flow as you will usually need to pay out for the goods long before they are received. Export transactions have a similar issue in reverse, delays in payments which are often 30 to 120 days or longer can put a strain on finances.

    Types of trade finance include

    • A letter of credit: This arrangement sees the importer’s bank promise the exporter that they will make
    • payment when traction is complete
    •  Import/Export credit: This is a working capital loan for imports and export
    •  Import / Export line if credit: Lending lines of credit are pre-approved funds you can access when you need for import or export purposes


    Advantages

    • More flexible than other types of loans
    • Lending against invoices is faster
    • A greater level of borrowing against assets (for secured loans)
    • Helps maintain cash flow while payments owing are in arrears
    • Finance is usually backed by an insurance policy or secured against the goods

    Disadvantages

    • Can be become expensive if the business lacks cash flow due to late payments


    Loans are important to help your businesses operate and grow. As a business owner, when applying
    for a loan, chances are you will want a loan that meets the following 3 conditions:

    What is trade finance


    Invoice Finance / Invoice Factoring / Invoice Discounting



    Invoice finance allows you to borrow money based on the value of outstanding invoices that customers
    owe your business. Unpaid invoices generally have a payment term of 30 to 120 days (or more) and
    this wait for payment can impact your business cash flow. Invoice finance allows you to receive a cash
    advance from lenders without needing to wait days or weeks for the vendor to honour the invoice debt.
    Industries that typically wait for delays in payment and can benefit from invoice finance include:
    There are three common types of invoice finance.

    • Recruitment
    • Pharmaceuticals
    • Courier and logistics
    • Manufacturing
    • IT services and products
    • Printing and publishing
    • Consulting agencies
    • Marketing agencies
    • Design agencies
    • Wholesaler
    What is invoice finance


    Invoice loans or invoice line of credit


    Invoice finance means you are using your invoices as proof (or collateral) that your business will be
    able to pay back the lender for a cash advance. These types of loans will either mimic a traditional
    loan where you receive a lump sum for the loan or a line of credit where you access funding when you
    need capital.

    A way to use invoices as collateral to borrow funds against debts owed from customers


    Invoice factoring


    Invoice factoring means you are selling to invoices to a lender (or factoring company) at a discount in
    return for cash that covers most of the value of invoices.

    A way to fund business cash flow by selling outstanding invoices to a lender at a discount


    Invoice discounting


    Invoice factoring means you are selling to invoices to a lender (or factoring Similar to invoice factoring, invoice discounting also involves selling the value of outstanding invoices
    to a lender (or factoring company) in return for immediate cash but the responsibility for invoice
    collection remains with your business. This arrangement means you are using the invoices as security
    and removes the need for customers to know about 3rd party involvement.

    A way to use invoices as collateral for a cash advance and for your business to maintain responsibility for the collection of invoice payments


    If your business has a human resource or finance department who can reliably handle timely debt
    collection and you don’t wish customers to know you are using a 3rd party to handle debt collection
    then business discounting may be suitable

    Advantages

    • Release up to the entire value of outstanding invoices immediately
    • Secure funding using invoices rather than other assets
    • Pay supplier invoices in a timely fashion
    • Level of funding can increase in line with the increase of invoice value
    • High credit business score may not be required

    Disadvantages

    • Higher costs (similar to short term loans)
    • Can become too reliant on invoice financing
    • May not be able to access if using other loan products
    • High charges if payment fall behind
    • High reliance on customers to pay invoices on time


    Caveat Loans


    Caveat loans are one of the fastest types of loans to arrange. If your business has suitable assets (usually property) then the lender can put a caveat on the asset in exchange for providing you with funding. Placing a caveat on an asset means you cannot sell the asset until you pay the loan.

    Advantages

    • An easy way to obtain finance quickly
    • Credit history unlikely to affect the ability to get a loan
    • The loan is secured with property
    • Caveat loans are very versatile
    • Low Document requirements
    • When funds are repaid, you are released from the loan

    Disadvantages

    • Must clarify with lender exactly how you use the funds
    • Best for short-term loans due to higher interest rates
    • Loan terms are shorter (1-12 months)
    • May have additional fees (application, valuation, legal fees)
    • The amount available to borrowers limited by equity value
    • Cannot see security until the loan is repaid


    Second Mortgage Loans / Home equity loans


    Second mortgage financing means you are using the equity in property assets that already have a mortgage, as collateral. As this is a second mortgage, the new lender will be the second in line with the first mortgage holder should there be a default on the loan.

    Advantages

    • Taps into the equity of your home without costs of the first mortgage
    • Avoid private mortgage insurance
    • The loan is secured with property
    • Lower interest rate than other types of loans
    • Flexible with how you use the funds
    • Tax-deductible

    Disadvantages

    • Higher interest rate than the first mortgage
    • Built-up equity reduces the net worth of business
    • Risk of foreclosure
    What is a Second Mortgage loan

    Business Credit Cards and Buy Now Pay Later Finance



    Business credit cards are fundamentally the same as personal credit cards. However, they are designed to meet the needs of small businesses. Some features to be aware of include:

    • You will likely need to provide a personal guarantee for debts
    • Business lending limits are higher than a personal credit card
    • Protections found on credit cards for personal loans may not be available
    • Reward programs are tailored to business needs


    With the increasing popularity of buy now pay later (BNPL) services, some business lending providers are offering BNPL specifically for business to business lending (B2B).

    BNPL means you can buy your product and pay off your purchase over time. The main difference between credit cards and BPNL is that credit cards charge interest rates until the credit is paid while BPNL has fixed payments over time with fees for late payments.

    Credit Card vs BNPL

    Application Process: BNPL has instant access to finance, Credit cards

    Advantages

    • Taps into the equity of your home without costs of the first mortgage
    • Avoid private mortgage insurance
    • The loan is secured with property
    • Lower interest rate than other types of loans
    • Flexible with how you use the funds
    • Tax-deductible


    Disadvantages

    • Higher interest rate than the first mortgage
    • Built-up equity reduces the net worth of business
    • Risk of foreclosure
    What is a Business Credit Card

    Fast Business Loans provides factual information about lending products for businesses. Information provided is taken from the lender's website or by contacting the lender's support for information. While we make efforts to ensure the information is accurate and up-to-date, the information provided published on this website should be treated as of general nature so
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    3. This website does not consider your business needs, objectives or financial circumstances so it not recommending any particular products.
    4. Fast Business Loans recommend reading the lenders product disclosure statements before taking up any financial product offer.
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