What is a business loan?
A business loan is a lump sum you borrow from a bank or other lender for the purposes of covering costs for your business. Finance for your business can take many forms, business loans being just one of them. Each form may be more or less suited than another to a particular use.
Each loan product is different from the next, with different loan terms available, lending amounts, whether you require collateral or not to secure the loan, interest rates and fees, loan repayment options, vastly different application processes and requirements, and an array of lending criteria. It’s important to consider all of these when undertaking a business loan comparison.
Here, you’ll find some general information to help you compare the different types of business finance available. As a dedicated business lender specialising in Aussie small business, Prospa has already lent over $1.35 billion to more than 24,000 small businesses across the country. We can help you to grow and thrive by offering not only great finance products but also by providing ongoing and dedicated support.
Other types of loans:
- Business car loans and equipment financing: These are usually secured against the asset (a business vehicle or piece of equipment) they have been taken out to cover the cost of. Often the interest rates will reflect the risk to the lender so you could be offered lower interest rates on brand new vehicles than you would on second-hand ones.
- Business credit card: A handy way to support working capital and for smaller purchases. This option is common, yet not as flexible as a line of credit. Fees may be higher than for a loan and although you can avoid paying interest, interest rates are high if you don’t manage your repayments efficiently.
- Business overdraft: This is a nominated amount on your bank account which allows your business to continue to draw funds after the balance is nil. Fees can vary between providers and often the overdraft must be paid back within a nominated term. This can help to keep interest rates down as well.
- Business line of credit: This is on-call funds that can be accessed to manage short term costs and buy a bit of breathing space. You can pay it off and reuse it up to the approved balance, and it can be revolving or come with a renewable term of, say, 12 months. It is important to understand the interest and fees associated with your line of credit – especially for missed payments.
If you are seriously thinking about a finance product for your business, then you should think about everything that is available. Take some time to compare your options and to evaluate your costs. You could also consider speaking with your accountant or finance broker, because you may find that there is a finance product perfect for your business that you hadn’t even thought of.
What do I need to consider before applying for a business loan or a line of credit?
There are many things to consider before you apply for business finance. Keeping them in mind will help make your comparison easier. You should ask yourself the following: What do you need the funds for? How much do you want to borrow? When do you need the funds? Do you intend to apply for a secured business loan or an unsecured loan? What interest rate and fees are associated? What repayment schedule would you be comfortable with?
Prospa offers a line of credit of $2,000 to $100,000 and business loans of $5,000 to $300,000 with no asset security required upfront to access $100,000. You can apply online in minutes. A quick chat to one of our Business Lending Specialists will complete the application process and, if approved, funding is possible in 24 hours.
We are here to support Aussie businesses. Our dedicated support team is available Monday to Saturday to discuss how your business is travelling and what you might need to keep it moving in the right direction.