Compare the Top 10 Small Business Loans


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    $75,120
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    $75,325
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    $67,254
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    $74,250
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The Top 10 Most Popular Small Business Loans
Ultimate Guide (Updated 2020)

Small business loans come in many forms today, from “unsecured business loans” that provide fast, short term funding to take advantage of an opportunity, to a “short term business loan” to cover a shortfall. There are more small business finance options to consider than the standard business loans the banks offer. Business loans can be used for any genuine business purpose too, there aren’t any restrictions. Over 50% of Australian small businesses have a loan facility of some description. Today, you do not have to offer any collateral or security to get a business loan. In this guide, let’s explore which business loan is best for you…

1

Unsecured Business Loans

An Unsecured Business Loan allows you to cover any business related finance need. The Unsecured Business Loan is a short term facility – usually up to a maximum of 12 months. You’ll repay the loan and interest daily or weekly. No security (collateral) is required to get a loan.

Loan Amount

AMOUNT

$5 - $500k

Business Loan - Terms & Conditions

TERMS

3 - 24 months

Business Loan Rates

INTEREST RATES

High

Loan Speed

SPEED

As fast as same day

What can you use an Unsecured Business Loan for?

Unsecured Business Loans can provide a boost to your working capital and allow you to make investments in inventory, equipment, renovate, hire new staff – ANY business activity.

Some business owners use this type of business loan to cover cash flow fluctuations and even for new business opportunities.

Pro's Con's
  • Application processes are usually fast, simple and online
  • Finance available without the security of property or other fixed assets
  • Finance available to smaller businesses that do not meet the banks’ rigorous lending criteria
  • Unsecured business finance is a higher risk for the lender, so interest rates are likely to be higher
  • Terms, rates, fees and conditions may result in higher borrowing costs
  • Depending on the amount you borrow, you may need to provide a personal guarantee, which means you will be responsible for repayment if your business is unable to meet its obligations
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2

Line of credit

An agreed amount is made available for you to access at any time you need it. Often with a line of credit you will only pay interest on the drawn down amount, not the whole facility.

Business Loan Amount

AMOUNT

$5 - $250k

Business Loan Terms

TERMS

3 - 12 months

Business Loan Interest Rates

INTEREST RATES

14% - 30%

Business Loan Speed

SPEED

1 - 2 Days

What can you use a Business Line of Credit for?

There are no restrictions on how you can use this money.

Pro's Con's
  • Extremely flexible – draw and repay funds as you need them
  • No minimum amount - only borrow and pay interest on what you need – usually calculated daily
  • Quick and simple application process
  • No long-term certainty – can be cancelled at any time and is repayable on demand
  • Terms vary and you may be required to pay off the overdraft at specified intervals
  • Likely to incur fees even if not used

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3

Invoice Finance

Invoice finance is also known as “factoring” is when you sell your invoices to a lender. The lender will forward you up to 80% immediately of the invoiced amount and become responsible for collecting payment.

Business Loan Amount

AMOUNT

$5 - $100k

Business Loan Terms

TERMS

3 - 180 Days

Business Loan Interest Rates

INTEREST RATES

3 - 5%

Business Loan Speed

SPEED

1 - 3 Days

What can you use Invoice Finance for?

Any business purpose like buying new machinery or paying tax debt.

Pro's Con's
  • Immediate injection of cash – no need to wait for payment of invoices
  • Removes the risk of late or non payment of invoices
  • Can be used to cover short term finance issues
  • You receive less than the face value of the invoice
  • Usually more expensive than loan finance
  • Many lenders have minimum turnover requirements – may not be available to new businesses without an established sales history

The trouble with invoicing your customers

Big Businesses Pay Late

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4

Merchant Cash Advance

With Merchant Cash Advance a lender will provide you with a lump sum payment in advance and then collect repayment (and their fees) as an agreed percentage from your daily sales.

Business Loan Amount

AMOUNT

$5 - $250k

Business Loan Terms

TERMS

1 - 12 months

Business Loan Interest Rates

INTEREST RATES

Usually ~20%

Business Loan Speed

SPEED

Fast

What can you use a Merchant Cash Advance for?

Anything, such as working capital or buying new inventory.

Pro's Con's
  • Quick and easy online application process
  • Immediate cash injection – funds usually available within days
  • Repayments directly linked to cash flow - no fixed interest payments or repayment schedule, with repayments made as an agreed percentage of sales
  • Only available to ‘merchant’ businesses making daily debit or credit card sales e.g. retailers, restaurants
  • History of achieving a minimum average level of sales may be required
  • Often considerably more expensive than other financing options with rates as high as 60% – 200% APR
  • No government regulation on lenders, so terms and conditions can be complex and restrictive
5

Equipment Finance

Equipment finance is a fixed term loan product to purchase machinery or equipment for your business. The asset will be owned by the Lender throughout the term of the contract.

Business Loan Amount

AMOUNT

$5k - $2m

Business Loan Terms

TERMS

1 - 5 years

Business Loan Interest Rates

INTEREST RATES

6 - 15%

Business Loan Speed

SPEED

7 - 14 days

What can you use Equipment Finance for?

To purchase plant, equipment or machinery for your business.

Pro's Con's
  • Small or no deposit or up-front payments, minimising the initial impact on working capital
  • Flexibility to set a repayment plan to suit your cash flow, usually over a term of up to five years
  • Quicker and easier to secure than loan financing. You may be able to claim GST credits for GST included in the lease charges
  • Higher interest rates and costs than loan financing
  • No equity built up in the asset – you do not own the equipment the end of the contract
  • Lease contracts usually have substantial early-termination fees so you’re locked in even if you no longer need the equipment
6

Hire Purchase

A medium term loan product to purchase an asset. The asset is owned by the Lender until the end of the finance term.

Business Loan Amount

AMOUNT

$5 - $2m

Business Loan Terms

TERMS

1 - 7 years

Business Loan Interest Rates

INTEREST RATES

4.6% - 15%

Business Loan Speed

SPEED

7 - 14 days

What can you use a Hire Purchase for?

Typically used to purchase an asset. Buying plant, machinery and equipment for your business.

Pro's Con's
  • Flexibility to tailor your repayment play to suit your cash flow needs and match the life cycle of the asset
  • You own the asset at the end of the contract and can continue to use or dispose of it as you wish
  • You may be able to claim GST credits for GST included in the purchase charges
  • Unlike leasing you will need to pay a deposit, which will impact your working capital
  • Higher interest rates and costs than loan financing
  • You do not own the asset until the end of the contract
7

Commercial Bill of Exchange

This business finance can be provided over a range of terms, usually to help with seasonal shortfalls in working capital.

Business Loan Amount

AMOUNT

$5 - $500k

Business Loan Terms

TERMS

1 - 24 months

Business Loan Interest Rates

INTEREST RATES

1.7% - 1.75%

Business Loan Speed

SPEED

4 - 7 days

What can you use a Commercial Bill of Exchange for?

Any business purpose, for example; working capital, staff commitments, marketing.

Pro's Con's
  • A short-term facility with the option to roll-over at each maturity date
  • Can be used as a revolving line of credit (draw down funds as you need them) or a term loan with the principle reducing at each rollover
  • Interest is payable on maturity – terms vary with maturity at agreed intervals (eg. 30, 60, 90, 120, 150 or 180 days) and the potential for periods of fixed interest
  • Interest is payable in advance and includes a margin above standard rates
  • Variable rate bills are very sensitive to fluctuations in interest rates
  • High minimum borrowing amounts (often $500,000) – only suitable for established businesses with high turnover
8

Traditional Business Loan

A longer fixed-term secured borrowing facility, like a mortgage. Often you will need to use personal assets to secure the loan. Most commonly available from the big banks (think: ANZ, Westpac, Commonwealth, NAB).

Business Loan Amount

AMOUNT

$50k - $10m

Business Loan Terms

TERMS

1 - 10 years

Business Loan Interest Rates

INTEREST RATES

2.97% - 12.83%

Business Loan Speed

SPEED

Slow

What can you use a Business Loan for?

Usually used to purchase buildings, retail premises, expansions, buying competitors.

Pro's Con's
  • Many lenders allow you to choose between fixed and variable interest rates or a combination
  • You may have a choice of interest-only or interest plus principle repayments
  • The loan term is usually tied to the life of the asset and you can set a repayment schedule to match the cash-flow of your business
  • Loans secured by non-residential assets attract higher interest rates
  • Most loans have minimum borrowing amounts
  • Lengthy and rigorous application and approval process – only available to established businesses
9

Personal Loans

Your typical personal finance fixed term loan, fixed or variable interest rate loan.

Business Loan Amount

AMOUNT

$5 - $40k

Business Loan Terms

TERMS

1 - 3 years

Business Loan Interest Rates

INTEREST RATES

7.75% - 19.09%

Business Loan Speed

SPEED

7 days

What can you use a Personal Loan for?

You can use this money to purchase anything.

Pro's Con's
  • More economical than leasing or hire purchase for buying equipment and machinery
  • Can usually be repaid early without penalty
  • Repayable in instalments, spreading the cost of equipment purchase
  • Availability and amount will depend on your personal credit rating
  • Personal (not business) responsibility for repayments
  • Usually higher interest rates than other business loans
10

Business Credit Card

As per your standard credit card, a company credit card will often been securitised against the business owners.

Business Loan Amount

AMOUNT

$2 - $100k

Business Loan Terms

TERMS

Ongoing

Business Loan Interest Rates

INTEREST RATES

5.88% - 20.95%

Business Loan Speed

SPEED

1 - 7 days

What can you use a Business Credit Card for?

Best used to purchase consumables and to help smooth out fluctuations in cash flow. In reality, you can use it for whatever you like.

Pro's Con's
  • Convenience – very easy to make purchases
  • Flexible source of emergency cash flow
  • Interest-free periods on some cards make them an economic short-term purchasing tool
  • May be linked to your personal rather than business finances
  • Interest rates can be very high
  • Can incur considerable fees and charges even when not used

Small Business Loans

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A small business loan is type of business loan specifically for small to medium sized businesses. Generally you need to have been trading for at least 6 months and have a minimum monthly revenue of $5,000. Generally, small business loans up to $150,000 can be approved and funded on the same day.

Small Business Loans Compared

Product Unsecured / Secured Rate Fees
Bank Overdraft Secured 5.07% - 12.45% $0 - $1280
Secured Bank Loan Secured 2.97% - 9.83% $0 - $3250
Unsecured Bank Loan Unsecured 9% - 27% $0 - $2625
Business Credit Card
5.88% - 20.95% $0 - $450
Personal Loan Secured 7.75% - 19.09% Included in Rate

The main reason small businesses take a loan

Non-Recourse Factoring

Purchase real estate

Loans for Business Renovations

Renovations

Your Business Inventory

Buy inventory and stock

Recourse Factoring

New employees

Business Loans for Equipment

Buy equipment or machinery

Business Capital

Increase working capital

Business loans for extra business opportunities

An opportunity that is too good to pass up

Business Advertising

Advertising and Marketing

Business Competitors

Buy a competitor out

Business Loan Premises

Move premises

Business loans to pay staff

Pay staff

Business Loan - Tax Situation

Pay BAS or Tax Payments

The three basic principles to consider when evaluating finance.

These fundamentals will have a big impact on:

  • Your ability to be able to secure a loan
  • Speed to access funds
  • The fees and interest you will pay
Business Loans - Conditions

Match the type and term of finance to your business needs

You can cover fluctuations in working capital with flexible short term business loans or an overdraft – but if you’re making a big purchase you’ll need a long term loan with a repayment schedule that matches your cash flow.

Safe Guard your Financials

Safeguard your cash flow

Maintaining cash flow is one of the biggest challenges faced by any small business, so it’s vital that you have funds available when you need them – but be aware that you’ll pay more for at-call financing like an overdraft, which gives you access to funds whenever you need them.

Business Loan Dictate Rates

Match the type and term of finance to your business needs

To successfully secure financing you’ll need to convince a lender that you are a good risk (as per how they determine this) to get the lowest interest rates. For some types of loan, you’ll need to offer security, such as your property. With any financing application you’ll have to provide full financial data about your business – and a realistic repayment schedule that takes into account factors such as seasonal fluctuations in turnover, and the risk of late payment by your customers.

How to choose the right lender

Online lending is becoming a crowded market and there are new lenders popping up all the time, many specialising in particular forms of business lending like invoice finance. Each have different requirements (e.g. minimum borrowing amounts) and offer different terms and conditions.

  • Choose the finance product you want first
  • Research multiple Lender websites for rates and fees
  • Seek assistance from an independent third party

How to get a small business loan

To get a business loan you’ll need to prepare a basic business case and budget for your loan. Establish how much you need to borrow and how much you can afford to repay, over what period. Do not over commit your business. Use this business loan calculator to determine how much you can borrow.

Lend Business Loans - Apply Online
Visit your chosen lender’s website
Business Loans - Apply Online
Complete an online application form
  • Your business details
    • ABN
    • Structure
    • Location
    • Sector
    • Turnover
    • Time in business
  • How much you want to borrow and for how long
  • How you will use the funds
  • Basic details about yourself (especially where you are required to provide a personal guarantee)
Business Loans - Upload Documents
Upload your supporting documents
  • Your bank statements for the last 4 to 6 months
  • Your credit sales / merchant statements for the last 4 to 6 months
  • Proof that you have been operating for the lender’s minimum required period
  • Proof that you meet the lender’s minimum turnover requirements
  • Personal identification documents

What happens next?

  • From here, the Lender will assess your loan amount versus the creditworthiness of your business to determine your eligibility and either provide you with an instant response online or phone you, once their credit team has looked at your application.
  • Once approved, you can sign the loan agreement (electronically) and get the business loan funds on the same day.

Before you agree to any finance make sure...

Loan Facts
Can afford to repay it
Business Loan Understanding
Understand all of the fees and charges
Loan Facts
Are confident you are getting the best deal

The top 8 reasons your business loan application will be declined (Eligibility criteria)

  • Your revenue is inconsistent
  • You haven’t been in business long enough
  • Existing debt or loan facilities
  • Your business is seasonal
  • Your industry is weakening
  • The majority of your revenue comes from a handful of suppliers
  • Your industry is too high risk
  • Poor credit history

Business Funding For Start Ups

If you are a start-up, you’ll find out that no one really wants to lend to you, you’re just too high risk. You could consider doing sweat equity deals (people provide services to you at reduced or no cost in exchange for equity) or sell some equity.

Product Unsecured / Secured Rate Fees Alternatively you can search for a suitable business grant or beg family and friends.

Around 25% of ALL small businesses have a credit card but no other forms of debt. Be aware a business credit card will often be secured against you personally but can provide the instant cash injection you need to pay for supplies and inventory. Use wisely and carefully.

Frequently Asked Questions

Q: How do you qualify for a small business loan?

To qualify for a small business loan, typically the business needs to have been trading for at least six months, have a monthly turnover of at least $5,000 and be able to service the loan repayments.

Q: How long does it take to get approved for a small business loan?

In most cases, the entire process from loan application to decision takes less than an hour. Small business loan approvals can be approved fast due to the technology used by fintech lenders. For example, electronic bank statement transaction history can be analysed in seconds and credit engines are used to automate most of the decision metrics.

Q: What's the difference between a bank business loan and a loan from a fintech lender?

To a bank, whether you are borrowing $30,000 to do a renovation or wanting to borrow $2,000,000 to acquire a competitor makes no difference to them. For this reason, banks aren’t always overly excited to facilitate this loan for you. Where as a fintech lender is geared up for exactly this, small business loans. Most fintech lenders allow technology to decipher your business’s financial health and make a lending decision fast. If you do manage to jump through all the hoops the banks put you through, you will most likely be offered a much lower interest rate than a fintech lender with less fees. However, if you are like the overwhelming majority and need fast access to cash, the fees and higher interest rates can seem insignificant.

Q: What is an unsecured business loan?

An unsecured business loan is a type of business loan that does not require the business owners to provide security as collateral. This means you do not have to offer your assets such as property, vehicles and equipment as security to the lender. If you default on the loan, the lender can't automatically take your property or other assets.

Q: What interest rate can I expect to pay?

With an unsecured business loan you will pay higher interest rates than that from a bank. Again, it’s a risk rated product meaning that a business that hasn’t been trading long, with inconsistent revenue - will pay more than a business loan applicant who has been operating for 5+ years with consistent revenue.

Q: Are there different requirements if I live in a particular state?

No, regardless of whether you live in WA, SA, NSW, VIC, TAS, QLD or even NT, you will be assessed the same way, but do note if you live in a tourist “hot spot” your business may have seasonal income which will be assessed differently.

Q: Can I pay off my business loan early?

Yes, most lenders will allow you to pay out your loan early, HOWEVER, you need to check the fine print. Some lenders will charge you for the privilege and sometimes this will outweigh paying the loan out early. If you feel you might be in a position to pay the loan out early, or at least want the flexibility to do so without penalty, you need to choose a lender with this as an option.

Q: How long does it take to get approved for a small business loan?

Yes, most lenders will allow you to pay out your loan early, HOWEVER, you need to check the fine print. Some lenders will charge you for the privilege and sometimes this will outweigh paying the loan out early. If you feel you might be in a position to pay the loan out early, or at least want the flexibility to do so without penalty, you need to choose a lender with this as an option.

Q: Why do I need to provide bank statements?

You’re asking to borrow tens of thousands of dollars to your business. A lender needs to feel comfortable to lend their money to you. To get that level of comfort, the lender needs access to your bank statements as this gives a true picture of your business. It essentially allows the lender to reverse engineer your real, “right now” Profit and Loss (P&L) statement. Balance sheets, P&L Statements out of your accounting systems can all be altered and may not be up-to-date. Bank statements do not lie. Read more here.

Q: How do I get a business loan to buy an existing business?

Buying an existing business can be an exciting opportunity to grow your business and open doors to new customers. If you’ve done your due diligence, have a solid strategy and you’re confident that the acquisition will be beneficial for your business then you can apply for a business loan. Make sure you have factored in all the costs and have estimated your new revenue. Lenders will still take into account how long you’ve been business, your current revenue and expenses and the industry.

Q: Is my business eligible to get business finance?

It depends on several factors, including:

  • How long you have been trading. Most lenders like to see that you have been trading at least 6 months.
  • Your industry: Lenders will lend to most industries, but some are more favourable than others.
  • Your financials: As mentioned, lenders will want to see your bank statements to make a decision. They want to assure that you can afford to service a loan.
  • Your credit score: Does your credit history and score reflect that you’re responsible?
  • Its best to speak with a business loans broker if you have more eligibility questions as a broker will have access to many different types of lenders.

    And YES! You can get a business loan if you are a sole trader or self employed.

Q: What to consider when buying a business?

The first question to ask is why are they selling? You don’t want to be throwing good money after bad. A business may be for sale because it’s not making enough money or barely breaking even. We’re not saying you can’t turn it around, it may well be the case of poor management. Sometimes there’s a genuine reason for selling such as retirement, moving, health and/or family reasons. Just ensure you conduct proper due diligence. Carry out competitor research, inspect the financials, products/services and premises. Learn who the customer is are and understand the market.

Q: Are small business loans hard to get?

No, the application process is quick and simple with fintech lenders. They just want to ensure you can service a loan without hurting your business - responsible lending. If you’ve been trading for six months and you're making a profit it should be a simple process to get a business loan. It costs nothing to find out, and as the old saying goes, money makes money - so the quicker you can get access to funds the quicker you can make more money.

Q: Can I get a loan to expand my business?

Business expansion is usually a good sign of business growth and you shouldn’t be held back when growing. Funding business growth should be part of your business plan and strategy. After all, isn’t that why you’re in business instead of working for someone else? To build it, grow it and make it a successful business. When applying for a loan to expand your business the lender will look at your financials, industry and how long you have been in business and talk to you about your intentions to get a better understanding of how they can help.

Q: Do you need a deposit for a business loan?

No, in Australia you do not require any deposit to get a term loan for your business. You may only be required to have a deposit if you were buying a piece of equipment, or if you were wanting to buy an existing business.

6 Examples Where Small Business Loans Could Help You:

  • You’re a seasonal business and you need to build your product inventory before the holiday period even though you're short on cash right now. History tells you you will make the sales.
  • You get a golden opportunity to buy stock at a discounted price but you need to buy it immediately
  • A retail premise you have had your eye on has finally come up for rent, you’re going to have a huge expense in relocating
  • To purchase a new piece of machinery to improve efficiency and output
  • You’ve secured a great premise but now you need to fit it out
  • You’re BAS & Tax payments have caught you off guard and you need to get them paid

The reality is, whatever it is that you need for your business, from working capital, releasing cash from unpaid invoices or to bring on new employees, an unsecured short term small business loan can be invested in to your business however you like. You can even get a business loan if you have bad credit.

The future of alternative business lending in Australia:

While the banks might seem like the obvious place to turn for a loan, they aren’t always a viable option for small businesses. Bank loan application processes can be slow and burdensome – and without a solid financial history or security to offer, small business loan applications frequently get rejected by banks. An inquiry was recently concluded into the access and funding for small business and it was acknowledged:
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Small business lending by non bank lenders in Australia is on the same trajectory as the US market. In the US the Small Business Lending Index indicates alternative non bank lenders approve around 64.1% of all applications whereas the big, risk averse banks would approve less than one fifth (17.8%) of the same commercial applications.

In fact, Morgan Stanley recently predicted that alternative business finance lending would lend $11.4 billion annually to SME’s by 2020 in Australia when $0 was funded via marketplace lending in 2014.

The convenience and speed at which small business can finally get access to money through unsecured business loans online is helping drive small business Australia forward.

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Grow the business you want.

See if you qualify