Compare the Best Unsecured Business Loans

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Unsecured Business Loans

Unless you've been in business a while or have assets such as property, chances are your bank won't lend you money. This is where unsecured business loans come into play. They're a great option for new businesses, startups and businesses that don't own assets.

What is an unsecured business loan?
Generally speaking, there are two types of loans, secured and unsecured. An unsecured loan means the loan is not secured against an asset such as property, cash or equipment.

Since the lender doesn't have security over your assets (cannot force you to sell your assets in the event of non payment), unsecured business loans usually come with a higher interest rate.

They're often hassle-free (less paper work and requirements) and fast (can be approved the same day).

Loan Amount
Amount
$5k - $250k
Loan Terms
Terms
3 - 12 months
Loan Interest Rates
Interest Rates
High
Loan Speed
Speed
As fast as same-day

Let's take a look at the Pro's and Con's.

Pro's:
  • Fast and simple online application approval processes
  • No collateral or security required
  • Funding offered to small businesses that would not normally meet traditional lending guidelines
Con's:
  • You’re likely to pay a higher interest rate, due to the greater risk for the lender.
  • Additional fees can increase the cost of the finance
  • 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

Comparison between secured and unsecured loans

Secured Loan Unsecured Loan
Length of Loan (term) Longer (up to 5 years) Shorter (Up to 12 months)
Interest Rate Lower (example: 5%) Higher (example: 12%)
Requirement Credit and ID check.

12+ months in business.

Business financials.

Collateral in case you
default, such as your home,
car or other assets.

More paperwork. 		Credit and ID check.

3+ months in business.

Less paperwork. 100% online.
Speed of Decision Can be approved in weeks. Can be approved in days.
Loan Amount Unlimited $5,000 to $250,000

Grow the business you want.

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How do I get an unsecured business loan?

1
Step 1Small Business Loans
Step 1

Work out how much you actually need - do not borrow more money than you actually need.

2
Step 2Small Business Loans
Step 2

Understand the different financing options and decide which repayment and product is going to be best for you.

3
Step 3Small Business Loans
Step 3

If you need the money fast, compare your options online to see if you qualify.

4
Step 4Small Business Loans
Step 4

Apply online with your chosen lender and provide any documentation they need.

5
Step 5Small Business Loans
Step 5

The money is in your account.

Unsecured Business Loan Requirements

  • 6+ months in business (sometimes as little as 3 months)
  • Australian registered business
  • Online bank account
  • Minimum turnover of $60k per annum

As mentioned in the loan comparison table, an unsecured loan has less requirements. Above is a list of what the requirements usually entail.

How much can I borrow?

Unsecured finance lenders prefer regular cash flow over anything else. The amount you can borrow will be determined by:

  • Your credit history
  • How long you have been in business
  • Your average monthly revenue
  • How you collect payment from your customers (whether you process credit card payments, cash or send invoices)

Grow the business you want.

See if you qualify

What is the average interest rate
on an unsecured business loan?

Unsecured business loan interest rates are calculated on risk. It’s risk based lending. The higher the risk your business is, in the case where your cash flow could be inconsistent and you’ve just started out, you’re extremely high risk and you will pay a higher interest rate than a business seeking funding for an expansion who has strong cashflow and has been trading for many years. See examples below.

Example 1

Time in business: 7 months
Payment types: 80% invoice, 10% EFTPOS payments, 10% cash
Rate: 28% APR

Example 2

Time in business: 2 years
Payment types: 70% EFTPOS payments, 30% invoice
Rate: 14% APR

To work out the cost or to see how much you can borrow use our business loan calculator.

As you can see, this type of business financing does cost more than a traditional bank loan. You’re paying an increased amount for speed and a hassle-free process. It’s always best to do a business loan comparison to make sure you are paying the lowest possible rates and fees.

Start ups and new businesses will find it more challenging to get funding as the risk when you are starting out is high. It’s not until you have at least 3 months (ideally 6) trading history and some cash flow will your business be considered for a business loan.

4 Scenarios Where Unsecured Business Loans Can Help

  1. Alexander is a mechanic that recently started his own business. He’s been trading for four months and rents an industrial unit. The business needs a car hoist that is going to cost $14,000. The average monthly revenue is $7,000.

    He approached his bank for a loan and they couldn't help due to only being in business for four months. Alexandra looked for business loans online, completed an online loan application and was offered an unsecured loan on a 9 month term.

  2. Jason started his printing business two years ago and needs to rent a larger space with additional equipment to allow him to increase output that will secure more customers. He doesn’t own property or assets due to investing most of his money into growing his business.

    He needs $75,000 to help cover the cost of relocating, renting larger premises and hiring more printers. His average monthly turnover is $19,000 and 75% of his customers pay by POS credit card, the remaining 25% are invoiced on 30-day-terms and pay by bank deposit.

    An unsecured loan is a good option for Jason because he doesn’t have any assets or collateral to secure a loan with.

  3. Emma has a retail business in a high street selling homeware items. An opportunity has arisen to purchase stock at a discounted price but she needs to buy it immediately.

    An unsecured loan is ideal for Emma as she needs access to funds fast to avoid missing out on the stock. 85% of Emma’s revenue comes from card payments so she is offered a unsecured loan via merchant cash advance.

  4. Rebecca and Susan own a cafe in a popular seaside tourist destination. They are very busy during the spring and summer months, but business slows down during autumn and winter. They want to renovate the cafe during winter in preparation for spring.

    The renovation includes expanding the seating area which will help serve more customers. They need $65,000 for the renovation. Although their monthly revenue drops during autumn and winter, and they will need to close for 3 weeks, the annual revenue shows that they can afford the loan.

    They take out an unsecured business loan on a 6 month term to pay for the renovation.

Grow the business you want.

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Unsecured Business Loans Compared

Loan Description
Unsecured Term Loan A term loan is a loan that is repaid in regular payments over an agreed period of time. They’re usually for a specific purpose. For unsecured term loans, the term is normally between 6 to 12 months.
Unsecured Line of Credit A line of credit, also known as a cash advance, or revolving line of credit, provides you with access to a specific amount of funds. You can use part or all of the funds and pay it back and use it again and again. You only pay interest on the amount drawn.
Unsecured Merchant Cash Advance For businesses that have regular merchant payments (credit card and EFTPOS). The lender will loan you a percentage of your merchant sales in advance. You repay the loan daily, through an agreed-upon percentage of future sales from your merchant sales.
Unsecured Bank Loan Some banks offer unsecured loans. It’s the same as the term loan above, but from a bank instead of a finance company. The loan requirements vary from bank to bank and are based on the risk of you and your business. Often these requirements will be quite strenuous.
Unsecured Bank Line of Credit It’s possible to get an unsecured line of credit from a bank. It’s the same as the line of credit above, but from a bank. You will need to provide additional information to see if you qualify. Banks usually have more requirements and it takes much longer to get the loan approved.

Grow the business you want.

See if you qualify