Compare the Top 10 Small Business Loan Lenders

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The Top 10 Most Popular Small Business Loans

Small business loans come in many forms today. From a “merchant cash advance” to “unsecured small business loans”, there are more small business finance options to consider than the standard business loans the banks offer. 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. Explore which business loan is best for you…

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.

Amount

$5k - $400k

Terms

3 - 12 months

Interest Rates

High

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:

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

Con's:

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

Pro Tip:

Make sure you fully understand the pricing of the loan, including charges and interest rates

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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.

Amount

$5 - $250k

Terms

3-12 months

Interest Rates

5.07% - 12.45%

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:

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

Con's:

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

See if you qualify

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.

Amount

$5k - $100k

Terms

30-180 Days

Interest Rates

3-5%

Speed

1-3 Days

What can you use Invoice Finance for?

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

Pro'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

Con's:

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

See if you qualify

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.

Amount

$5k - $250k

Terms

1-12 months

Interest Rates

Usually ~20%

Speed

Fast

What can you use a Merchant Cash Advance for?

Anything, such as working capital or buying new inventory.

Pro'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

Con's:

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

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.

Amount

$5k - $2m

Terms

1-5 years

Interest Rates

6-15%

Speed

7-14 days

What can you use Equipment Finance for?

To purchase plant, equipment or machinery for your business.

Pro'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

Con's:

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

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.

Amount

$5 - $2m

Terms

1 - 7 years

Interest Rates

4.6% - 15%

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:

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

Con's:

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

Commercial Bill of Exchange

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

Amount

$5 - $500k

Terms

1-24 months

Interest Rates

1.7% - 1.75%

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:

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

Con's:

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

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).

Amount

$50k - $10m

Terms

1-10 years

Interest Rates

2.97% - 12.83%

Speed

Slow

What can you use a Business Loan for?

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

Pro'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

Con's:

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

Personal Loans

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

Amount

$5 - $40k

Terms

1-3 years

Interest Rates

7.75% - 19.09%

Speed

7 days

What can you use a Personal Loan for?

You can use this money to purchase anything.

Pro'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

Con's:

Availability and amount will depend on your personal credit rating
Personal (not business) responsibility for repayments
Usually higher interest rates than other business loans

Business Credit Card

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

Amount

$2 - $100k

Terms

Ongoing

Interest Rates

5.88% - 20.95%

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:

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

Con's:

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 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	2.97% - 12.83%	$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

Purchase real estate

Renovations

Buy inventory and stock

New employees

Buy equipment or machinery

Increase working capital

An opportunity that is too good to pass up

Advertising and Marketing

Buy a competitor out

Move premises

Pay staff

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

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.

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.

The risk dictates the rate

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.

Visit your chosen lender’s website

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)

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...

Can afford
to repay it

Understand all of
the fees and charges

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.

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: 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 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: 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 12 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: Is it hard to get a business loan?

No, the application process is quick and simple if using a fintech lender. They just want to make that you can service the loan without hurting your business - responsible lending. If you’ve been in a business a while and your making a profit it should be a simple process to get yourself a business loan to help you grow your business. 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 begin making 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:

Financial Conditions for Small and Medium Business

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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