Best Short-Term Business Loans Australia

1. Unsecured business loan

An unsecured business loan is a common type of short-term finance for small businesses. Unlike a secured loan, you don’t need to provide collateral like property or other assets as security for the loan. This means the application process is generally very quick.

Loan terms on unsecured finance usually range between 6 months to 36 months with some providers going to 60 months.This allows businesses to cover temporary cashflow fluctuations without being tied to a lengthy finance contract.

The exit fees associated with these loans can also be very preferential to the borrower in that there are often no fees payable to exit the facility after a certain part of the loan has been repaid.

According to Lend’s proprietary data, the median loan amount requested for an unsecured business loan is $134,000, but facilities are available from $10,000 to upwards of $1,000,000.

Even though the finance is not secured by an asset, you may be required to provide a personal guarantee for your short-term business loan, which makes you ultimately responsible for the debt.

2. Business line of credit

A business line of credit or overdraft is a revolving credit facility that allows you to draw down funds as you need, up to a predetermined limit. Usually, you’ll pay a facility fee and then interest on the amount drawn down only. Additionally, you’re also able to pay off the outstanding balance when you wish with no penalty.

This is a popular short-term finance option for business, as you can access the funds almost instantly and at any time once the line is set up. If you regularly purchase stock, have payment terms with your clients and/or suppliers, this type of facility can really help remove the speed bumps in your businesses cashflow.

Interest rates on lines of credit and overdrafts are the same if not identical to business loans in the current lending environment, but they offer much more flexibility. You can use a line of credit for any genuine business expense, although access to working capital and expansions are the most common purposes.

3. Invoice finance

If you offer credit terms to your customers, invoice finance (or invoice factoring/debtor finance) can boost your short-term cashflow without requiring you to take on debt.

It’s effectively a cash advance or line of credit secured against your outstanding invoices. It involves selling your accounts receivable to a factoring company (or factor), which advances you up to 90% of their value.

Once your customers pay their invoices, the lender deducts their fees and charges from the balance of the invoice once paid.

Most businesses engaging in this style of product often pass a portion or most of the cost of the finance onto their clients who require payment terms. As these products are priced sharply, this cost is minimal vs a traditional business loan.

According to Lend data, the top industries that use invoice factoring include construction and trades, transport, mining and wholesale/retail. This option accelerates cashflow in the short term without taking on debt.

4. Business credit cards

Many people associate credit cards solely with day-to-day business expenses, but they can also be a very effective way to access short-term finance for larger costs. The beauty is that most businesses already have a credit card, so in some cases the access to funds already exists or you can simply speak to the provider about extending your credit limit (usually up to $100k).

You generally have up to 55 days to pay off any purchase interest-free, or you can revolve the balance if needed. Just bear in mind that interest rates on business credit cards are usually high – often in excess of 20%.