Check if you are eligible?
All you need to get started –
- Active ABN or ACN
- Minimum 6 months in Business
- Minimum monthly turnover of $10K
There are a variety of loans available to help fund for business expansion and growth. A business loan may be suitable for your business if you need funding for things such as a business acquisition, start-up costs, capital investment, property acquisition or development, or refinancing other lending.
Business loans can help with managing cash flow by providing a lump sum of cash that can be used to cover expenses. They can also help to finance business growth by providing the funds necessary to invest in new opportunities.
What is difference between Unsecured and
Secured Business Loans?
There are a number of different business loan options available, so it’s important to research the best option for your business needs, this also goes for secured and unsecured. The main difference between a secured loan and an unsecured loan is whether an asset such as commercial or residential property, or other business assets are used as security against your loan. For corporate borrowers, director guarantees may be required.
If you choose to offer security for your business loan, you will typically pay a lower interest rate than if you choose the unsecured business loan option. Bear in mind that the interest rate is lower because they are secured against a pre-agreed asset, which can be recovered against if you are unable to repay the loan.
Secured Business Loan
A secured loan requires personal guarantee or an asset to be provided as security. This may be property, inventory, accounts receivables or other assets. This security covers the business loan amount if you're unable to pay it back.
-
Collateral
Collateral required depending on loan amount -
Interest Rate
Usually lower between 2% to 15% -
Loan Amount
Between $5,000 - $1 Million +
Usually higher depending on secured collateral -
Loan Term
12 months - 30 years -
Approval Time
4 - 6 weeks -
Suitability
- Established Business over 6 months - 1 year
- Strong Credit History
- Business in need of renovations, expansion, stock -
Drawbacks
- If payments aren't met collateral is taken
- Longer turnaround time
- Additional hidden fees -
Requirements
- Asset Evaluation
- Credit history & ID Verification
- Cashflow Statements
- Tax Returns
- Additional personal and business financials
Unsecured Business Loan
An unsecured loan doesn’t require physical assets (such as property, vehicles or inventory) as security. Instead, your lender will often look at the strength and cash flow of your business as security.
-
Collateral
No Collateral required -
Interest Rate
Usually higher between 5% to 35% -
Loan Amount
Between $5,000 - $500,000+
funding amount depends on business cashflow -
Loan Term
3 months - 12 months -
Approval Time
Fast approval process
within 24hrs -
Suitability
- Fast access to funding
- Less paperwork and assessments required
- Freedom to use your funds how you see fit for your business -
Drawbacks
- Higher rates
- Shorter terms
- Potentially additional fees depending on lender -
Requirements
- Annual Turnover
- Credit history & ID Verification
- Cashflow Statements
- Additional documents may be required
To conclude, Secured Loans offer lower rates and longer terms. However, the approval process is longer with various in-depth documentation required as assets are used as security for the loan. On the other hand, Unsecured loans use cashflow as security, instead of physical assets. The approval process is quick, as no security is required. However, the interest rate is higher than secured business loans.
What are other Business and General Loan Options?
There are multiple types of Business and Personal loans available in Australia, with so many loan options, it’s important to know your business needs and align it with the most suitable loan type. The options vary depending on your business needs, the length of the loan and the terms of the loan.
Here is a quick guide to help you differentiate between some common types of general loans and business loans:
Mortgage Loan
A mortgage usually has a lower interest rate, but refinancing it will take longer and require more documentation than a business loan.
Personal Loan
While it’s not recommended to mix a personal loan for business purposes, this is sometimes an option for a new business looking for extra cashflow.
Business Loan
Depending on weather you are looking for Long-Term or Short-Term Loans you can choose to pay in regular installments over a set period of times.
Merchant Cash Advance
A merchant cash advance is a type of business financing that is particularly well suited to a small business that accepts debit and credit card payments from customers.
Line of Credit
Line of credit that is usually connected to your business transaction account, which you may use when you need to make a purchase but do not have enough money in your account.
Overdraft
An overdraft is an approved extra amount of funds attached to your business transaction account, which you can access whenever you spend more than the balance in your account.
Other loan options
There are few other types of funding options for those wanting to grow a business
An expensive way to borrow money, only use if you can pay off monthly balance. It may take as little as a week to get a business credit card, depending on your circumstances, including how long you have been in business and your credit score. You may use business credit cards to purchase anything you want. As long as you pay the minimum amount due, you may vary your payments to accommodate your schedule. However, creditcard interest rates are much higher, and some businesses have difficulty when credit card payments aren’t paid on time or accrued interest isn’t repaid.
A fully drawn advance loan is a type of term loan that gives the borrower money to purchase assets or make long-term investments. The borrower must repay the loan with principal and interest within a specified period.
There are two types of finance lease:
- Full payout – the assets is rented / leased to the customer for a fixed period (normally the useful life of the asset), the customer makes rental payments that cover the capital cost and interest at the end of the lease period the customer can either return the asset, continue to use it by making a peppercorn rental
- Residual Value Lease – the assets is rented / leased to the customer for a fixed period (normally a period which is less than the useful life of the asset), the lessor (owner of the asset) predicts what the asset will be worth when the asset is returned to them. The customer (lessee) pays a rental which is the capital cost of the asset – predicted rv value plus interest. When the fixed term has ended the customer (lessee) has two choices, return the asset, extend the asset for a further fixed period normally at a reduced rental, in some case the lessee may be able to purchase the asset, but this can impact capital allowances.
With a RV lease when the asset is return additional charges may be applied to cover damage to the asset over and above fair wear and tear (eg motor vehicles)
Your business can purchase assets through a hire purchase agreement, in which the lender purchases the asset and then allows your business to utilize it in return for periodic payments. Once all payments and the final payment have been made, your business owns the asset.
A balloon payment is a popular choice when choosing or leasing equipment or transportation vehicles for a company. A balloon payment can be a good option for various reasons, although there are some drawbacks to think about as well. Because balloon payments keep monthly payments low and free up your cash flow, you may want to consider them. However, you’ll be left with a big payment at the end of your term, and you’ll also end up spending more interest.
To conclude
Businesses that want quick funding without hassle can take advantage of Unsecured Business Loans. Business loans are preferable to general loans because you can keep your personal and business expenditures separate. A business loan also gives you the freedom to choose how you spend your money on your business rather than other leasing, equipment hire or restricted financing loans.
No Security Needed
No assets are required as collateral to apply for funding with a Capify Business Loan
Fast Approval
Connect your accounting software for a quick quote, have funds in your account within 24 hours
Minimal Documents
All you need is ID verification and cashflow statements
Learn more about Business Loans
Are you still wanting to know more about business loans? What the benefits are and whether it’s right for you and your business, check out our blogs to find out more
Disclaimer: All content is for general information purposes only and is not intended to, nor does it, constitute legal, accounting, business or financial or any other professional advice or services. You should obtain advice from a qualified financial advisor before making any investment or financial decision.
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