Start with your business plan
Before lending you money, most lenders want a clear picture of your financial position and what the funds are for. A solid business plan makes that conversation far easier, and speeds up your approval.
Getting business finance in Australia can feel like a maze of options. Before you get to that point, it helps to know which type of loan actually suits what you’re trying to do.
Know your numbers
Whether or not you prepare your own financial statements, lenders will expect you to understand your business’s financial position. A simple cash flow statement should cover:
- Current income
- Net profit
- Expenses
- Future projections
Debt finance or equity finance?
Debt finance is any funding you’re expected to repay, like bank term loans, business overdrafts, lines of credit, and loans from family or friends.
Equity finance means giving up part ownership of your business in exchange for funds, through private investors, the share market, or crowd-sourced funding, without needing to repay the cash itself.
Most small-to-medium Australian businesses use debt finance to get established and grow. Equity finance tends to come later, once a business has a track record that makes it attractive to investors.
When’s the right time for a business loan?
There’s no single right time, but common triggers include:
- Managing cash flow
- Growing the business
- Buying inventory
- Purchasing machinery or equipment
- Marketing and advertising
- Relocating or expanding
- Renovating
- Hiring and training staff
- Building credit for the future
- Paying off existing debt
Choosing the right loan type
Every loan type carries different tax and GST implications, so it’s worth talking this through with us before you commit. Even if you’re an existing customer somewhere, it’s worth comparing, since a better deal may be available elsewhere.
Common business finance products
Loans
Terms vary by amount, length, interest rate type, fees, and security required. Always check the product disclosure statement before applying, whatever type you choose.
Overdraft facility
An authorised limit attached to your business account, giving you working capital before income arrives. Not designed for capital purchases or long-term financing.
Line of credit
Draw funds at any time up to an approved limit, paying interest only on what you use.
Fully drawn advance
Funds provided upfront for long-term investments, such as new equipment. You can fix the rate for a period to keep repayments predictable.
Commercial bill
A fixed advance for short-term needs like inventory, with regular interest payments and the balance due at the end of the term.
Rent to buy
Pay an initial deposit, then lease the asset until it’s paid off. Worth comparing against other finance options for cost.
Commercial hire-purchase
Pay an initial deposit, then make instalments plus interest while leasing the asset. A larger final (“balloon”) payment can reduce your regular instalments.
Chattel mortgage
Similar to hire-purchase, but you own the asset from day one while making regular payments.
Factoring
A factoring company buys your outstanding invoices at a discount and chases up payment themselves. Fast access to cash, though typically more expensive than traditional finance.
Invoice finance
Similar to factoring, but your invoices and customer relationships stay with your business.
Secured vs unsecured business finance
A secured loan is backed by an asset, such as property, machinery, equipment, or vehicles, that the lender can claim if you can’t repay. An unsecured loan doesn’t require this, but your other assets may still be pursued if you default.
Why rates differ
Unsecured business loans generally carry higher interest rates, since the lender takes on more risk without an asset to fall back on. Secured loans typically offer lower rates in exchange for that added security.
What you’ll need
When you meet with us, we’ll make sure you’re prepared. Typically you’ll need:
- Proof of identification
- Your business plan
- The last three years’ financial reports, where available
- Financial forecasts
- Ratio calculations
- Personal financial information
We’ll help you pull this into a report that presents your business clearly to lenders.
Not sure where to start?
Talk it through with us before you apply anywhere. We’ll help you understand your options and make sure you’re walking into the application with confidence.