Find the best business loan interest rates today
Whether you're looking for a business loan for start up financing, to fund a new initiative or grow your company, Mozo compares current business loan rates to help you get the loan that best suits your needs. You can use our handy loans search tool above or check out our extensive business loans 101 guide to find and compare business loans features, like fees, repayment flexibility and rates.
What is a business loan?
Put simply, a business loan is a type of loan that’s specifically used to help businesses grow and meet their everyday running costs and needs.
Like other loans, business loans can come with variable fixed interest rates, they can be secured or unsecured and they tend to come with some basic fees. Business loans also vary in size to cater for a whole range of different needs, with offers in the Mozo tables above ranging from thousands to millions of dollars.
So why do Australian businesses take out business loans? Well starting or running a business often requires more funding than you might have stashed in your business bank account, which is why business loans can be a handy way to help grow and run your business.
Some of the popular ways businesses use loans include:
- Paying wages
- Hiring new staff
- Purchasing stock
- Paying invoices
- Buying new equipment
There are also a range of different types of business loans to suit specific funding needs. From business loans for invoice financing, equipment financing, business lines of credit and even short term business loans, there are a variety of speciality funding solutions on offer for Aussie businesses which can be compared in Mozo’s handy table above.
How do business loans work?
So once you’ve successfully applied for a business loan, how do they actually work? Many lenders now promise funding in as little as 24 hours, and once the loan amount hits your bank account you’ll be able to begin using it for purposes like those listed above as quickly as you like.
Just like a personal loan or your home loan, you’ll be charged fees and an interest rate with a business loan - either a variable rate which can fluctuate over time, or a fixed rate which will stay the same over the life of the loan. However, business loan interest rates can be a bit different as some of the fintech lenders offer fortnightly or monthly interest rates rather than the annual rates you may be used to.
And when it comes to making repayments, don’t be surprised if your lender requires repayments to be made on a daily, weekly or fortnightly basis rather than each month.
How to compare and apply for a business loan
Finding the right business loan can be tricky, especially if you don’t know what to look out for. When you start to compare business loans, here are some of the key elements you’ll want to keep an eye out for.
Rates and fees
As we mentioned above, business loan interest rates are a little bit different to other consumer loans. The way different lenders express rates varies, which is why it’s important to keep a close eye on whether the interest rate is per fortnight, per month or per annum when comparing deals. And some lenders don’t even offer interest rates up front, instead they’ll calculate a unique rate for each business based upon their own situation.
The other cost you’ll want to compare closely are fees, so don’t be surprised to come across:
- Application fees: This is a fee you’ll be charged at the start of your loan which can either come as a dollar figure or a percentage of the loan amount
- Ongoing fees: Also known as a service fee, these can be charged on a weekly, monthly or annual basis
- Early repayment fees: Some lenders will charge you an early repayment fee for the privilege of paying off your loan early
- Dishonour fees: A dishonour fee may be charged if a due payment isn’t able to be processed because of a lack of funds in your account
- Discharge fees: Some lenders will charge a discharge fee once your loan is fully paid off, or in the event that you refinance your loan
Aside from the actual costs of a loan, the other important aspect of business loans that you’ll want to compare are any useful features they come with.
- Funding speed: Many lenders, especially the new wave of online business loan providers, promise applications that can be filled out in as little as five minutes and funding in just 24 hours. So if you’re in need of funds quickly, a speedy application and funding process could be a handy feature.
- Extra repayments: Having the ability to make extra repayments on your loan can help you pay off your debt faster, while also cutting down on the amount of interest you pay. Just remember that some lenders will charge you a fee to make extra repayments.
- Redraw facility: If you do end up making extra repayments, a loan with a redraw facility could prove useful if you ever need to redraw any of those extra repayments to pay for unexpected bills or expenses.
- Flexible repayments: Some business loan providers only offer one time frame in which to make your repayments (daily, weekly, fortnightly or monthly), however, if you’d prefer to make repayments on a schedule that better suits your business, there are a number of providers which offer multiple options.
Luckily the Mozo business loan comparison table above makes all of this simple. You’ll be able to compare rates, fees and funding speed in a single glance, or you can hit the ‘details’ button for an even more comprehensive list of features for each loan.
Once you’ve found the right loan for your business, there are a few bits of information lenders will require in order for you to apply. Thankfully more and more business loan providers are making the application process as simple as possible with online applications that can be completed in as little as five minutes, but you may still need to supply:
- Your driver’s licence
- Your businesses ABN
- Financial documents such as bank account statements, tax returns and projected cash flow
- A business plan for how you intend to use the funds
Need some extra help? Mozo’s very own in-house business lending experts are here to help you find a business loan to match your needs. To get started, fill out a few simple details about yourself and the loan you’re after and one of experts will get in touch to give you a hand.
Business Loan eligibility
Before you apply for a business loan, chances are you’ll want to know if you’ll be eligible for one at all. In the same way that there are certain lending criteria for personal loans and home loans, you’ll also need to meet some minimum requirements in order to be eligible for a business loan. Here are some of the factors that might influence whether or not you get one:
Time in business: Lenders will often require your business to have been in operation for a minimum amount of time before they’ll offer you a business loan, with many lenders in the Mozo database requiring a minimum trading time of anywhere from 6 months to 2 years.
Annual turnover: Lenders also want to ensure that your business is generating enough income to cover your business loan repayments, which is why they generally require a minimum annual turnover. The minimum turnover you’ll need will vary depending on the lender and the type of loan you’re looking at, but they can start anywhere from tens to hundreds of thousands of dollars.
Personal and business record: Like all loans, lenders may look at both your personal and business credit history before offering you a business loan. That’s why it pays to maintain clean credit health by paying off debt and avoiding things like exceeding credit limits or making late repayments.
Outstanding tax: Like other credit history, an outstanding tax debt with the ATO could impact your ability to take out a business loan. That includes any payment arrangement you may currently be in with the ATO to repay any existing tax debt.
Types of business loans
Just like businesses themselves, business loans come in all shapes and sizes. That means that there are a range of different types of business loans you’ll be able to choose from to suit your individual needs, including secured and unsecured business loans and more specialised loans for particular funding needs.
Secured vs unsecured business loans
Secured and unsecured business loans are the main types of loans you’ll come across, and there’s a simple (and unsurprising) difference between them.
Secured business loans are, you guessed it, secured against an asset such as residential or commercial property, a vehicle, personal or business assets, or even against the business itself. Because there is collateral against the loan, secured business loans tend to come with more competitive rates and fees than unsecured business loans, as well as higher maximum loan values and longer loan periods. That could make them good for businesses which:
- Are happy or able to provide an asset(s) as security
- Need a larger loan amount
- Can make repayments over a longer period
On the other hand, unsecured business loans generally don’t require any security against them. But, because that means that the lender is taking a greater risk, it does mean that they tend to come with higher interest rates and fees, and you might not be able to take out an unsecured loan quite as large as a secured one. That means unsecured loans could be a good option for businesses which:
- Only require a smaller loan amount
- Don’t have property or other assets to secure the loan
- Can make repayments over a shorter period of time
Need some more information, or want to compare secured business loans and unsecured business loans for yourself? Make comparing offers easy by heading to Mozo’s business loans comparison tables to start your search.
Specialised business loans
Australian businesses also have a number of other business loans available to them which can be used to solve specific funding needs. For instance:
Short term business loans: Generally available with terms from 3 months to 3 years, short term business loans could provide the quick cash injection that your business needs. For example, to cover the bills while waiting for an invoice to be paid.
Equipment finance business loans: Whether it’s updating a piece of equipment or purchasing a new vehicle, specialised equipment finance business loans can help fund those big ticket purchases. Plus, the loan is generally secured against the asset itself.
Invoice finance business loans: Managing cash flow can be one of the biggest headaches for Australian businesses, which is why an invoice finance business loan could be a handy way to access the money your owed through unpaid invoices, but earlier.
Written by: Tom Watson, Mozo Business Banking Writer