Business loans check in: Has your cash flow stalled?

By Sophie Wong · · 3 min read
Fact Checked
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A sme business owner is shaking hands with a lender for a business loan

Some Australian banks believe that small-to-medium business enterprises, or SMEs, aren’t really keen on taking out a business loan. 

However, recent data from Small Business Loans Australia suggests otherwise. The problem is, SMEs feel they have to overcome a lot of hurdles in order to obtain a loan. 

Some of these hurdles include:

  • A long wait time before their loan application is approved 
  • Not having assets they can use as security
  • Not finding a good interest rate.

Furthermore, many businesses have found that since the pandemic began in 2020, additional difficulties have become apparent in the loan application process.

However, there are many lenders out there to choose from - each with different loan conditions, and processes that may vary from one another. So the experience can vary and might mean a speedier, and smoother application process, depending on your circumstances and the lender. 

So, as the economy slowly returns to normalcy, you might be wondering whether your business could benefit from a little boost in cash flow. 

Let’s have a look at whether a business loan might be the right decision for you.

A loan might help improve financial flexibility 

A man is trying to boost his business cash flow by using a pump.

As a business manager or director, you might be thinking about the current economic climate. There’s inflation, interest rates and staffing pressures among other things. 

You might be thinking about how your cash flow may be impacted - like a domino effect that begins with high costs and ends with consumers spending less, for example. 

It’s why some SMEs have turned to taking out a business loan to cover their larger expenses, while for some the goal might be to simply jumpstart cash flow.

It seems the money is there for the right applicants: note that lenders approve about 75 per cent of these small business loan applications, as reported by Small Business Loans Australia. 

However, this report also states that if you are a small business, your risk of defaulting on a loan is triple that of a larger business. Something to keep in mind. 

If you plan to go ahead with taking out a business loan, it’s important to do your research and look into what kind of loans are offered.

Financing types - a closer look 

A man is wrestling with a lever of interest rates for a business loan.

There are various loan types to be aware of, of course. For example, a secured loan, which appears to be the more popular financing option. Although, an unsecured loan isn’t that far behind among businesses, according to Small Business Loans Australia.

What do these different options give you?

Well briefly, with a secured business loan your assets may be used as collateral against the loan. This might give you a lower interest rate as the lender’s risk is lower. It’s an option to think about if you intend to borrow a larger amount of money. 

Alternatively, an unsecured loan requires no asset against it but can come at a higher cost. For instance, if your business defaults, you would be held responsible for paying off the debt. As such, it’s a riskier undertaking for a lender. 

This might also mean a lower loan amount is allowed, and typically with higher interest rates. Nevertheless, you might find this type of loan most suitable if you’re only looking to borrow a smaller sum. 

At Mozo, we have more information about business loans which you can find here.

Compare your options

Looking for the right business loan can be overwhelming with so many choices on the market. In saying that, we’ve made the process a little easier for you by including some options below. Have a look and compare business loans today!

Business loans comparison table - rates updated daily

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