Lumi Lux offsets rising business loan rates with automatic discounts

Rising interest rates and shaky consumer confidence have put many Australian business owners to the test this year, but non-bank lender Lumi hopes to extend a lifeline with an innovative business loan option. 

Dubbed Lumi Lux™, the loan rewards good repayment behaviour with periodic discounts. So long as there are no loan repayment arrears, dishonours or loan contractual breaches, a 25 basis point reduction will be applied every 6 months (up to a maximum discount of 2%).

“In a rising interest environment, we wanted to develop a product that is countercyclical and actually decreases your rate over the term of the loan,” said Lumi chief executive, Yanir Yakutiel.

He provides the example of a loan with a starting rate of 14% p.a. Assuming no rate hikes occur, rates will drop to 13.75% p.a. six months after the settlement date, and then to 13.50% after 12 months. 

Businesses can access between $200,000 and $500,000 in funding, with interest rates ranging from 14% p.a. to 20% p.a. depending on the age of the business and its annual revenue (among other factors).

Importantly, the loan is designed with more established businesses in mind, so having weathered the tumultuous COVID period will help when applying. Property is also required as security.

A sizeable chunk of business investment is fuelled by debt, so rising interest rates tend to narrow the opportunities businesses have to hire new staff, purchase equipment and expand operations.

By offering funding at rates which are discounted periodically, Lumi hopes to ease some of the strain caused by a rapidly changing interest rate environment.

Additional help is available via Lumi’s Payment Pause option, which lets businesses take a four week repayment holiday without having to worry about their credit scores being affected.

No interest will accrue over the four-week period, as is usually the case with repayment deferrals. Businesses will simply resume making the same repayments as before but with four extra weeks added to the loan term.

Just keep in mind that loan repayments can only be paused once during the agreed loan term, cannot be broken into instalments, and are granted at Lumi’s discretion.

To compare financing solutions currently available, head over to our business loans comparison page, or browse the selection below.