Australian Fast Unsecured Business Loans

  • Updated: 30/10/2021
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Top Australian Lenders

These are the top lenders for unsecured loans in Australia

  • Capify
  • Capify
  • – Best for small business loans overal
  • BizCap
  • BizCap
  • – Top choice to get a business loan, fast!
  • OnDeck
  • OnDeck
  • – True short-term loan specialist
  • Moula
  • Moula
  • – Great SME business loans with Interest-free period
  • Prospa
  • Prospa
  • – Great large low doc loans
  • Banjo Loans
  • Banjo Loans
  • – Top for simple application with no paperwork
  • GetCapital
  • GetCapital
  • – Great business overdrafts and term loans
  • Lumi
  • Lumi
  • – Fixed-rate loans for transparency

Top Australian Lenders For Unsecured Business Loans

  • 1Capify - Best Small Business Lender Overall

  • Capify is Fast Business Loan’s best small business finance provider overall based on their combination of fast loan application and approvals, decent funding amount, and flexible repayment terms.

    Borrowers can choose either unsecured short-term small business loans or merchant cash advances of $5,000 to $500,000 with a loan term of 3 to 12 months.

    To qualify for a short-term business loan, your business needs to have been operating for at least 6 months and have $20,000 in monthly turnover (or 12 months and $10,000 a month). A merchant cash advance by contrast has 3-month trading requirement and $10,000 in monthly turnover. Business loan repayments are fixed daily for business loans. while a merchant cash advance takes a percentage of your turnover using daily direct debit.

    You can complete your loan application online in minutes and you will not need to provide financials, tax returns, or BAS if you borrow under $75,000. If you provide all details, then you can expect funding to your business bank account completed with 24-48 hours.

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  • 2BizCap - Best Lender For Fast Finance

  • An unsecured business loan with Bizcap takes just 3 hours from application until the time your business received the funding, making Bizcap the best choice for fast funding. Best of all, no paperwork is generally required, With such a fast funding turnaround, you can focus on important matters such as growing your business, rather than dealing with paperwork and red tape.

    Bizcap’s unsecured business loans range from $5,000 to $1,000,000 and have a repayment term of 3-12 months. Payments can be daily or weekly and will vary to match your business’s high and low seasons. Should your business wish to repay the loan early, there are no penalties or costs.

    The lender promotes themselves as Australia’s most open-minded lender, as they have a very high approval rate. As long as you meet Bizcap’s minimum eligibility requirement of 5 months of trading and $10,000 in turnover per month, there a high chance of loan approval. Bizcap will even consider applications from businesses that have a poor credit score as long the business has good cashflow.

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  • 3Zip Business - Good Line Of Credit Up To 500k

  • Formerly known as Spotcap, Zip Business Capital offers unsecured business lines of credit. A line of credit has some advantages over a small business loan as it allows your business to maintain control over its borrowings. With this type of finance, your business will only pay interest for the funds that you borrow from the credit facility. Choose Zip Business Capital when you do not know how much funding you need upfront.

    A line of credit with Zip Business Capital can be up to $500,000 and converts to a loan (or advance) when you make a drawdown from the credit facility. Repayment terms for the drawdown range from 1 to 36 months. To be eligible for a business loan, your business needs to have been operating for 18+ months, achieve a turnover of $200,000 per year and be a profitable business.

    Zip is transparent with its costs and has no monthly fees, hidden fees, early repayment fees, or application fees. Each drawdown has an origination fee of 2-3% plus the interest rate costs.

    Consider Zip business Capital if you want access to one of the largest lines of credit facilities around and want to maintain flexible access to a credit facility as your business doesn’t know how much it needs to borrow.

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  • 4OnDeck - True Short-Term Loan Specialist

  • With a wealth of loan types available, choosing the right loan can be overwhelming. OnDeck solves this by having just one product that is flexible enough for most business needs and the lender works hard to make their product work for your business needs.

    Loans with Ondeck are between $10,000 and $250,000, while these loans are less than some other non-bank lenders, they are perfect for many small businesses. With this amount, you get a generous repayment term of 6 to 24 months. All cost are clearly displayed upfront via a SMART Box™ statement means full cost transparency and no hidden fees.

    To qualify for a loan, your business must have been trading for 1 year or more, have $100,000 in yearly revenue, a business credit score of at least 500, and no previous bankruptcy.

    Ondeck’s online application process takes only 10 minutes as you only need to fill in 15 fields and includes an automatic check of your credit score. Approval and funding take just 1 business day, which allows your business to resolve capital needs fast.

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  • 5Moula - Best Interest-Free Period

  • Moula offers unsecured business loans and Moula Pay, a ‘buy now pay later’ type of finance.

    Cost transparency is important and Moula is one of the few lenders to advertise its interest rate range. With an Annual Percentage Rate (APR) of 14.95% to 34.95% and a provider of SMART Box™ statement for easy quote comparison with other lenders, Moula quotes are an accurate reflection of how much you will pay for the loan.

    Business loans with Moula come as a lump sum between $5,000 to $250,000 and have a 12-24 months repayment term. You can repay early the loan early with no penalty.

    If you prefer flexible access to a credit facility rather than a lump sum, Moula offers Moula Pay. You can use this Buy Now Pay Later style product with any participating Moula Pay merchant. Interest rates are 3% per month with the first 3 months being interest-free meaning if you clear your debt before this time, there will be no costs.

    To apply with Moula, your business needs to have 6 months of trading, earn $5,000+ in monthly sales and have GST registration if the yearly turnover is over $75,000.

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  • 6Prospa - Top For Large Low Doc Loans 

  • Prospa offers a choice of two types of financial products, small business loans and business lines of credit and these products don’t require paperwork if the loan is under $150,000. To get a low doc loan, you only need to provide basic details so Prospa can verify you meet their qualification and perform a loan assessment.

    Small business loans with Prospa can be up to $300,000 and have a term of 3 to 36 months, with payments either daily or weekly. Choose this loan when you know how much funding you will need as interest rate costs apply throughout the loan. One thing to consider is that loans over $150,000 will require asset security.

    Funding for a business line of credit is between $2,000 and $150,000 and has a renewable 24-month term. Being able to access a credit facility on an as-need basis is ideal for short term funding as you only pay interest on what you draw down.

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  • 7Banjo - Great working capital options

  • Banjo Loans specialise in working capital solutions and offer 4 lending products to help with your funding needs. To qualify for these loans your business must have 2 years trading history and annual revenue of $500,000.

    Working capital loans and Flexi working capital loans are you classic unsecured loan products of $20,000 to $5000,000. The difference is a working capital loan has a 6 to 24-month term and flexi working capital loan has a term of 12 to 16 months with a 3 or 4 months of interest-only payment period.

    Banjo supply is a fast business loan or short term business loan, you can borrow $5,000 to $25,000 and receive approval immediately. Loan terms are 30 to 90 days.

    The last product is Banjo offer is a a bridging loan known as Single Pay. These loans of $5000 to $500,000 last 2 to 6 months allow you to sort out temporary cash shortfalls when you have known funding owed to you. Unlike other loans, which follow a fixed schedule, Single pay can be paid at the end of the agreed term with one payment.

    Banjo rewards good business, if your business has good creditworthiness and solid cash flow then the lender can offer better interest rate cost.

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  • 8GetCapital Good Range Of Loans For All Needs

  • GetCapital offers 3 types of of finance options to meet the different of small business owners. In addition to the classic unsecured term loans (up to $250,000), Get Capital offers business overdrafts and asset finance.

    Business overdrafts is GetCapitals most interesting product as you can attach your overdraft to any bank transaction account in Australia. These overdrafts require no security if less than $250,000.

    Asset finance solutions with GetCapital are chattel mortgage style which means GetCapital allows you to borrow funding to the purchase of equipment, vehicles and fitout needs. Loans under $100,000 do not need security while loans of $250,000 require bank statements. Loans of $1 million are full doc.

    You can borrow up to $1,000,000 for all type of finance. Business rate loan pricing ranges from 9.95% to 19.95% APR. To qualify your business must have been operating for 2 or 3 years and have an annual turnover of $250,000.  Applications can be done online in 5 minutes with funding possible on the same day or within 24 hours.

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  • 9Lumi - Fixed-Rate Loans For Transparency

  • Choosing Lumi means no hidden fees and charges as the lender prides itself on total transparency. Lumi is a founding signatory of the industry’s code of lending practice SMART Box™ which means you will know the true cost of your loan in a plain and simple format. The SMART Box™ also has the benefit of allowing for realistic comparison with other lenders that comply with the code.

    Lumi’s first product is a small business loan. If you choose this, Lumi will advise your entire repayment amount upfront, as they don’t believe in variable interest rates. Your payments will follow an amortized payment schedule, which means you will pay the same amount every week. The only certain cost you will have is a 2.5% establishment fee that is deducted at settlement.

    The other product Lumi offer is a line of credit. This option is best if you want to maintain access to a credit facility. Using a credit line has a $25 activation fee for each drawdown and a $30 monthly subscription fee to maintain the facility. Along with your interest, which has a fixed rate and is calculated daily these are your only costs.

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Ultimate Guide To The Most Popular Small Business Loans

‘Small business loans’ is an umbrella term that broadly includes all types of business financing that a lender or finance provider might loan to a small business. In return for the advance, the borrower agrees to pay back the loan in line with agreed terms which include finance charges, interest rate payments and repayment date.

The purpose of a small business loan is to enable small businesses to pay costs that occur as part of business operations. Many businesses find such funding critical as without it they would struggle to have the financial means to sustain or grow the business and succeed.

How do small business loans work?

Australian SMEs benefit from small business loans since it allows them to maintain the cash flow the business needs to operate. These funds are not just to pay for immediate expenses such as operating equipment or staff wages but also to make long term investments that can grow the business.

Remember any type of small business loan is a loan, and this does come with costs. You will need to pay back the amount you borrow (known as the principal) as well as interests on the principal. Depending on the lender, there may also be other costs such as origination fees (sometimes called establishment or set up costs) and direct debit fees.

Unless you are applying for a low doc loan, you may need to provide business financials when applying for a loan. These include profit and loss financial statements and bank statements that show business cash flow. To approve a loan, lenders need to be able to assess the credit risk of your business and to do this they need to review the businesses finances to check it is financially viable.

Small business loans tend to starts at around $5,000 and go up to $250,000 and even $1,000,000. As a rule, most lenders will advance about 100% of a months business turnover however some will go higher, up to 150% or even 200%.

How much you can borrow will also depend if you back the loan with some form of security. Secured loans typically have lower interest rates and come with longer loan terms since the lender can claim ownership of the asset if the loan is not paid. This security will nearly always be assets the business owns such as property or vehicles. Secured loans however is not usually an option for small businesses since they usually do not own suitable assets. This is where unsecured business loans are useful.

Unlike secured loans, unsecured business loans do not require the loan to be backed with collateral. While interest rates are higher and loan terms are shorter, they have the advantage of faster approval since the lender does not need to value the security. This means loans can be provided as soon as the same day of the loan application. For many businesses, the time saved being able to access capital is a worthwhile sacrifice for the extra costs.

What is a small business loan used for?

  • Purchase of business assets such as vehicles, equipment or machinery
  • Debt refinance
  • Acquiring a business or franchise
  • Expanding or growing the business
  • Staying competitive (upgrading or repairing assets, advertising and marketing campaigns)
  • Better manage cash flow
  • Fitout of working premises
  • Pay expenses such as invoices, repairs, staff wages

Understanding Business Loans

When taking a loan, you will usually need to make several decisions on the loan arrangement. Below we discuss some of these loan arrangements:

Variable Interest vs Fixed Rate business loans

There are two ways lenders charge you for the loan. Both offer different benefits so it pays to be familiar with your options.

Variable interest rate loans

Variable business loans mean the interest rate can go up or down, these rates usually followed guidelines set by the Reserve Bank of Australia.

Advantages and disadvantages of variable rates

Pros

  • Easier to refinance or switch loans
  • Can make additional payments
  • Early repayments are ok
  • Interest rates can change in your favour

Cons

  • Loan rates can change unfavourably
  • Need to monitor your rates
  • Uncertainty on repayment amounts if interest changes

Fixed-rate Interest loans

Fixed interest rates allow for predictable payments, you pay the same amount for each repayment. This is the more popular option for small businesses.

Advantages and disadvantages of fixed-rate loans

Pros

  • Certainty with repayments
  • Easier for budgeting
  • Protected against rate rises
  • Competitive interest rates

Cons

  • Possible early exit fees
  • May not be able to make extra payments
  • Redraw options are not common
  • Don’t benefit from improved interest rate changes

Unsecured vs Secured business loans

As already discussed, secured loans are backed by some form of collateral. Banks, in particular, prefer secured loans since the lender claim ownership if the loan terms as not honoured.

Unsecured loans don’t require security so is a more realistic option for small businesses. Unsecured loans do have higher interest rates but can be processed faster meaning they are a good option if cash is needed quickly.

Unsecured Business Loans

  • No collateral required
  • Good credit history is often required
  • Higher interest rates
  • Lower borrowing limits
  • Shorter loan terms
  • Personal guarantee required
  • More lenders to choose from
  • More types of loans are available
  • Easier to apply for and fast approval
  • Risk is with the bank

Secured Loans

  • Collateral required
  • Collateral required (usually property, vehicles or machinery)
  • Better for larger borrowing amounts
  • Longer repayment terms
  • Lower interest rates
  • Borrower loses collateral if they default
  • Usually required for bank loans
  • Can take longer to approve

Long-term vs short-term business loans

Short term loans tend to have more regular payments so you can pay the loan faster. Long term loans have higher funding amounts.

Long-term business loans

Long term business loans start from 12 months to 30 years and are of larger size ($500,000 to $50,000,000). Because of this, the business will need to secure the loans since the lender is taking greater risk.

Due to the significant amount of funding, approval for these loans can take time and are usually only available through banks.

Pros

  • Longer repayment period
  • Larger borrowing amounts
  • Lower interest rates

Cons

  • Requires security
  • Strict lending conditions
  • Possible higher overall repayment (despite lower interest rates)

Short-term Business loans

Short-term business loans will be paid off in a shorter period of time (compared to long term loans. This period can be as little as 30 days but can extend up to 18 months but in recent times some alternative lenders have begun to allow up to 5 years.

Since the loan period is short, funding is also lower with $5,000 to $500,000 being a common range. Many of these loans are unsecured however this will depend on the lender and the credit history of the business.

You will usually find these loans with non-bank lenders since the application process has lower barriers for approval. Once approved, funding is often available within one day.

Pros

  • Flexible – secured or unsecured
  • Easy application process (often online)
  • Not alway reliant on business credit score
  • Approval can be done within 24 hours

Cons

  • Shorter repayment period
  • Lower borrowing levels

Types of Small Business Loans

Business loans for SMEs combine in different forms, below we look at some of the most popular ways a business can obtain finance.

Unsecured Business Loans

While an unsecured business loan is a generic term for any kind of business loan that required no security, it is generally understood to refer to a term loan.

With a term loan, the lender gives you the full amount of funding upfront and you pay back the full amount (principal) plus interest following a specific repayment schedule. This schedule allows for repayment options such as daily, weekly, fortnightly or monthly but can follow other schedules as well.

Unsecured business loans generally follow a short term facility, usually 12 to 24 months, but can be longer. These loans are popular with small business owners since they relatively easy to obtain if your business has ok creditworthiness, require little paperwork and have fast funding.

What is an unsecured business loan?

An unsecured business loan allows business owners to borrow capital without collateral. Rather than using assets to secure the loan, an unsecured business loan does not require a guarantee. For this reason, lenders take on greater risk so place higher weight on the revenue, time in business and creditworthiness of the business.

unsecured term loan

What can you use an Unsecured Business Loan for?

Unsecured business loans are a good option for maintaining cash flow or working capital. The loan can be used for any business purpose.

Best for:

Business owners know exactly how much funding they require upfront since interest is paid on the full amount from the start.

Not for:

Business owners that don’t know how much funding they need or only need capital for occasional one-off or emergency situations.

Advantages and disadvantages of unsecured business loans

Pros

  • No collateral needed
  • Low barriers to qualifying
  • Funding in less than 24 hours
  • No risk to business assets
  • Can help build credit history
  • No or little paperwork required
  • Can usually apply online
  • Large number of fintech lenders offer these loans

Cons

  • Higher rate of interest
  • Repayment periods are shorter
  • Lower loan amounts
  • Personal guarantee required
  • Some lenders require decent credit score
  • Lender can still hold you liable in event of default by going to court

Note: Lenders sometimes have other names for unsecured loans. Regardless of the name, most or all are interchangeable.

  • Working capital loans – simply an unsecured loan that give you extra capital for business purposes.
  • Bad credit loans – lenders will lend you you if you have a poor credit score provided you can show healthy cash flow. Security may or may no be required
  • Fast business loans – Loans that can usually be approved on the spot through automated checking processes
  • Good faith loans – literally another name for unsecured loans
  • Short-term loans – Usually has more frequent repayments (ie. daily or weekly). This can save you on interest costs as loan can be paid within 1 year
  • Cash flow loans – much the same as a working capital loan
  • Low doc loans – if the loan amount is not too large (ie. below $100,000) then lender may approve without paperwork. An alternative to bad credit loans
  • Same day loans – These loans promise you will get you funding on the same day you apply. Make sure you apply befor 3pm so processing can be done
  • ABN loans – Nearly all business loans in Australia requires the business to provide an act Australian Business Number (ABN). This reduces the required paperwork
  • No collateral loans – Literally another name for an unsecured loan. Collateral is another term for security.
  • Sole trader loans – can be secured or unsecured. These loans make it easier for self-employed individuals who struggle to maintain financial records to get a loan.

Line of credit

Unlike term loans, which give you the full amount of funding upfront, a line of credit gives you access to a credit facility. This line allows you to draw from the credit line any time you need up to the credit limit.

The advantage of a credit line is that you are only charged interest on what you draw from the credit line.

There are two types of credit lines fixed and revolving. The latter works much like a credit card in that the balance is reset after you repay the balance. Fixed lines do not allow you to reuse borrowed funds.

business line of credit

What can you use a Business Line of Credit for?

Business lines of credit provide a buffer in the event there is a cash flow shortage. Since the credit facility is preapproved, access to extra working capital can be done very fast.

Best for:

Business owners that don’t know how much funding they need or only need capital for occasional one-off or emergency situations.

Not for:

Best for short term business goals, it is not ideal for large or long term investments.

Advantages and disadvantages of a business line of credit

Pros

  • Lower interest rate than business credit card or business overdrafts
  • Flexibility to access funds on an as needs basis
  • Only pay interest on what you drawdown
  • Usually no set term or fixed repayment schedule
  • Can access funds through banks, EFTPOS
  • Option to only pay interest without principal
  • Help build creditworthiness

Cons

  • Tempting to overuse leading to a cycle of credit debt
  • Fees to withdraw from the credit line
  • More paperwork for approval than other types of loans
  • The credit line can be cancelled anytime leading to immediate repayment

Invoice Finance

This is a type of cash advance where your business uses unpaid invoices or account receivables to get more capital. The outstanding invoices are sold to the lender who advances you 80% to 95% of the value of the invoices in cash upfront. When the invoices are paid, the lender pays back the remaining amount less any loan fees.

The advantage of invoice finance is that it allows your business to get immediate working capital instead of waiting 30 to 120 days for the client to pay their debt.

invoice finance

What can you use invoice finance for?

Also called debtor finance, invoice finance is an umbrella term that includes trade finance, supply chain finance and import finance, export finance, spot factoring, selective invoice finance. Invoice finance comes in 2 forms: Invoice factoring or invoice discounting

Best for:

B2B businesses that have regular unpaid invoices on their books leading to cash flow issues.

Not for:

B2C businesses or businesses that do not regularly invoice customers.

Invoice discounting

Here the lender is responsible for collecting the debt from the client that has been invoiced. This saves the business needed to manage the account receivables book.

Advantages and disadvantages of invoice discounting

Pros

  • The business maintains control of credit collections
  • Best for businesses that don’t need accounts reconciliation help
  • Invoices are not sold but capital is drawn against it
  • Clients don’t find out you are using invoices for advances
  • Cheaper than invoice factoring
  • Customers pay the business not the invoice collection agency
  • The business maintains control of client relationships

Cons

  • Can only use commercial invoices
  • Your business is responsible of collection of invoices
  • Can become too reliant on invoices for funding

Invoice factoring

Here your business is responsible for collecting the debt from the client that has been invoiced. This saves the business on the cost they would pay the lender since the lender no longer needs to collect the invoice debt.

Advantages and disadvantages of invoice factoring

Pros

  • Improves cash flow
  • It grows as you do: more invoices means more to advance
  • Fast source of funding
  • Includes account reconciliation support (credit control, collections)
  • Credit insurance may be available to protect against non-recourse bad debts
  • Require little paperwork
  • Invoices act as security

Cons

  • Usually requires a long term contract with the invoice collection agency
  • Invoice collection add to the cost the financer will charge
  • Credit limit can’t exceed the value of invoices
  • Can impact your reputation as clients may learn your cash flow situation
  • Customer relationships are in the hand of the invoice collection agency
  • May have hidden costs
  • The financer will check the credit history of the client

Merchant Cash Advance

A merchant cash advance is not a loan but an advance. This is because the lender grants an advance of capital in return for a percentage of the daily card sales of the business. Rather than pay back the principal and interest to a fixed schedule, you pay back adance using a small portion of your daily credit card or debit card sales.

This type of finance is only suitable for businesses that make all sales through EFTPOS or card sales.

merchant cash advance

What can you use a Merchant Cash Advance for?

Only businesses that make all their sales through card payments can use a merchant cash advance. Since repayments are directly tied to daily sales, it is perfect for businesses with fluctuating sales or seasonal sales. This is because you pay more when sales are high and less when sales are low.

Suitable businesses for merchant cash advances include:

  1. Retail businesses
  2. Hospitality businesses
  3. Online or e-commerce stores
Good for:

Businesses that make sales through EFTPOS or cannot qualify for other types of loans

Not for:

Merchant cash advances are expensive so use another loan type if possible

Advantages and disadvantages of merchant cash advances

Pros

  • Repayments are based on business daily card sales
  • Sensitive to businesses with seasonal revenue
  • Payments are automatic via direct debit
  • Funds are provided upfront and quickly
  • No security required

Cons

  • Interest rates are high
  • Can only accept card sales
  • The business must make all revenue through card sales
  • A minimum level of sales may be required

Asset Finance, Equipment Finance

Asset finance you to access business assets such as equipment, vehicles and machinery without needing to buy the asset upfront. Since the asset has a re-sale value, the asset can be the security.

Since the asset is the security, meaning interest rates are low, Asset Finance is one of the most popular types of finance. Another benefit is that a low credit score is usually required making it a suitable option for established businesses, new businesses and even startups.

asset finance

What can you use Asset Finance, Equipment Finance for?

Asset Finance is a general term that covers all types of finance. Different types of asset finance include:

  1. Equipment loan or chattel mortgage: Here the lender gives you the cash for you to purchase the asset. The asset is then used as security for the loan
  2. Hire-purchase agreement: Here you hire the asset from the lender and own the asset at the end of the agreed hire period (provided you meet your payment obligations).
  3. Lease agreement: Much like a hire-purchase but you do not own the asset at the end of the hire term
  4. Asset-based lending: This means using your own assets as security to finance new assets
Good for:

Business owners that need to purchase or lease business assets

Not for:

Businesses that don’t need new assets or to upgrade existing assets

Advantages and disadvantages of asset finance

Pros

  • Don’t need to own obsolete equipment (can upgrade or return to the lender at end of loan)
  • The asset is the security so the business (or property) cannot be repossessed
  • One of the easier types of loans to obtain

Cons

  • More expensive than buying the asset outright
  • If the asset is repossessed then the business operations may be affected
  • High-interest rates due to a longer repayment period
  • Depending on the agreement, may not own the asset

Business Overdrafts

A business overdraft is a type of line of credit attached to the business bank account so that the business can continue to make withdrawals when the account has no funds remaining. By attaching the overdraft facility to the business bank account, funds can be drawn and redrawn up to the maximum limit of the overdraft facility without the need for re-application.

An overdraft allows flexibility over cash flow since you can access the overdraft when needed and only be charged interest on what is drawn. By attaching the overdraft to the bank account, a debit card can be provided allowing for easy access to funding via ATM machines.

business overdraft

What can you use a business overdraft for?

Business overdraft come with high interest since it is used when the business has no remaining funds so should not be used as a primary means for funding. This type of business funding is best used as a short term solution for quick or unexpected funding needs

Best for:

Seasonal business since overdraft can help cover the gap until new revenue comes in

Not for:

Expenses that will take time to pay off, everyday use

Advantages and disadvantages of business overdrafts

Pros

  • Speed and ease: immediate finance for short term needs
  • Flexible repayment terms
  • Overdraft is revolving and does not need reapplication
  • Financial safety net – It is there when you need it
  • Interest costs only on drawdowns
  • Can be secured or unsecured

Cons

  • Interest rates can be high
  • Fees apply to set up attachment to the bank account
  • Temptation to misuse since easy to access the facility
  • Qualifying can be difficult, need a good credit record

Traditional Business Loans (secured loans)

This is a fixed-term loan that follows a regular repayment schedule. While traditional loans can be unsecured, they are usually understood to be secured, have larger funding amounts and longer loan terms than unsecured loans. Since these loans can be up to $50,000,000 you will usually need to use a major bank such as ANZ, NAB, Westpac or Commonwealth bank) for funding.

traditional term loan secured

What can you use a Business Loan for?

Since the loan has larger lending amounts than an unsecured loan or short term loan, documentation will need to be provided. This will usually be in the form of profit and loss statements, business tax returns, balance sheets and cash flow records. Banks (in particular) may require a business plan to show how the business intends to repay the loan.

Since these loans are secured, from a lenders point of view, it is a safer form of business lending since they can claim the secured asset in the event of default. For this reason, secured loans have lower interest rates than unsecured loans.

Best for:

Businesses requiring loans of significant size that will take a long time to pay off. Businesses with poor credit records. Start-ups can also benefit from secured loans

Not for:

Businesses concerned that may struggle to meet payment obligations in a timely fashion or default

Advantages and disadvantages of traditional business loans (secured)

Pros

  • Lower interest rates (compared to unsecured loans)
  • Borrow larger amounts (up to $1,000,000,000)
  • Longer repayment period (up to 30 years)
  • Relatively straight forward to obtain
  • Easier to obtain with poor credit

Cons

  • Longer to approve since collateral needs to be valued
  • Need proof the business owns the collateral
  • If default results in loss of asset, business operations can be affected
  • Usually need to go to a bank, not always available with fintech lenders
  • Business must be well established (usually 3 years+)

Business Credit Cards

Business credit cards are the most user friendly of all available loan options. Much like a personal credit card, you can access a credit line up to a maximum amount and pay these debts over time with interest. However, they do have a few points of difference.

Many business credit cards allow extra cards to be attached to the account for each employee. This allows customisable spending limits and expense tracking for the holder of each card.

Some business cards include analytical tools to business can better manage business reporting and budgeting. Other business cards can integrate with business accounting packages such as Xero, Reckon, MYOB and Sage.

Much like personal credit cards, rewards programs are available however these rewards are tailored to the needs of businesses. Examples include free insurance or priority access to airport lounges.

business credit card

What can you use a Business Credit Card for?

Business credit cards can be used for literally any purpose, personal or business. However, as an employee holding the card, expenditures will need to be justified to the employer

Best for:

Businesses with staff that need to pay for expenses outside the office such as travel

Not for:

Businesses wanting to avoid loans with high-interest rates

Advantages and disadvantages of business credit cards

Pros

  • Easy qualification (one of the easiest of all loans to qualify for)
  • Access to easy financing (can access via ATMs)
  • Get rewards when you use the card
  • Freebies sometimes included (ie, free travel insurance)
  • Builds busines credit history
  • Security not required
  • May have interest free period
  • Can give card to employees in their name)

Cons

  • Persona guarantee required
  • High interest rates
  • May have annual fees
  • Lack purchase protection common with personal credit cards
  • Security issues (online fraud)
  • Risk of employee abuse

Unsecured Business Loans FAQs

Is a small business loan secured or unsecured?

Most short term loans in Australia are unsecured based on flexibility, faster approval times and a more straightforward loan application process. A secured loan is more suitable when the loan amount is higher and required on a long-term basis. Primarily businesses choose a secured loan when purchasing long term assets such as vehicles or equipment.

Can you get a small business loan with bad credit?

Yes, in most cases an Australian business with bad credit are eligible for an unsecured business loan. This is because eligibility is less based on the credit score of the business and more focused on working capital requirements and the ability to pay back the line of credit based on recent history. This is determined by viewing the borrower’s bank statements focusing on monthly turnover to access the creditworthiness of the business.

What happens if you default on an unsecured business loan?

When you default a business loan the lender may renegotiate business finance options or take the matter to court to collect the repayments. Some provider may also use a debt collection agency that goes through processes to collect the funds on the lender’s behalf. Additional fees will be charged on funds reclaimed and interest rates may be increased to cover default costs such as the debt collection agency.

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