A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.
A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.
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As you can imagine, a $20k business loan can fund a lot of things. For a small business, it might be enough to help you launch a whole new product line. For a larger business, it can simply shore up an extra bit of cash flow. Here are a few ways you could put $20k to work for your business:
Test out a new product line
Improve cash flow
Boost your marketing efforts
Upgrade key equipment
Train your staff
Make modest renovations.
While it certainly won’t go as far as a $100,000 business loan, it clearly provides a range of options.
$20,000 is a moderately sized loan, which opens up a variety of financing options. Here are a few types of loans available at this size:
Term loans. Available in short, medium, and long terms, these lump-sum loans can be paid off over the course of a few months to several years.
Equipment finance business loans. These are specifically designed to help you purchase equipment (such as a vehicle or industrial machinery), with the equipment often serving as collateral.
Revolving credit. Lets you borrow as needed up to the $20k, for things like cash flow or unexpected expenses.
Business credit card. Just like a personal credit card, but for your business.
Invoice financing or merchant cash advance. These options give you the money upfront, with your unpaid invoices or future sales serving as the basis for repayment.
Here are some pros and cons of each:
Financing Option |
Pros |
Cons |
Term Loans |
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Equipment Finance Business Loans |
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Revolving Credit |
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Business Credit Card |
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Invoice Financing or Merchant Cash Advance |
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The application process can vary based on the lender and the type of loan, but here’s generally how it works:
Decide what kind of loan you need. First, identify the type of loan you need. This usually aligns with your business objective. For example, if you need new equipment, equipment financing is a logical choice.
Research and compare. Next you’ll compare your options, factoring in things like interest rates, repayment terms, fees and eligibility criteria.
Apply online. Once you've chosen a lender, you can usually apply online. You’ll need to provide details about your business, financial documents and the purpose of the loan.
Equipment evaluation (if applicable). With equipment financing, the lender may want to assess its value and condition before approving the loan.
Review and approval. The approval process can take anywhere from 24 hours to several weeks, depending on the complexity. Don’t be alarmed if the lender reaches back out for more information in the meantime.
Funding. Once approved, the funds will usually land in your account within a few business days. For equipment financing, the loan is usually paid directly to the vendor or supplier.
While specific criteria may vary between lenders, some common requirements include:
Be a fully registered business with an active Australian Business Number (ABN) or Australian Company Number (ACN)
Have a minimum turnover, which can be anywhere from $40,000 - $60,000 annually
Be in businesses for a minimum of between 6 months to 2 years
Have a solid credit history and no unpaid tax bills.
The interest rate on a $20,000 loan varies on quite a few factors including the purpose of the loan, the length of the loan, your credit history, whether you have any collateral, whether it’s fixed or variable interest… as you can see, it really depends on the circumstances.
But to give you some idea, as of August 2024, interest rates for business loans in the Mozo databse range from just over 6% to upwards of 24% per year, reflecting the current high-interest rate environment.
Some common fees you might find with a business loan include:
Application fees. A non-refundable, one time charge is at the beginning of your loan whether or not you’re approved. It may be a fixed dollar amount or a percentage of the total loan amount.
Service fees. These are ongoing monthly or yearly admin fees that pay for the maintenance of your loan.
Late payment fees. If you miss a repayment, you could be hit with a late payment fee.
Exit fees. If you pay off your loan early, especially with fixed-rate loans, your lender might charge an exit fee.
Not every loan will include all of these fees, and some lenders may waive certain fees as part of special offers they might be running. Your best bet is to get familiar with the fee structure of any loan you’re considering, and don’t forget to keep an eye out for special deals.
Repayment options depend on the type of loan you choose. Typically, lenders offer monthly, fortnightly, or weekly repayments. Some loans, like merchant cash advances, might even have daily repayment options. Choose the schedule that best fits your business’s cash flow, within the options you're given.
If your business has bad credit, a bad credit business loan might seem like an option. However, it's important to note that Mozo doesn't compare these loans due to their often exorbitant interest rates.
In this case, it might be more beneficial to tap into any savings you have or work on improving your credit score before applying.
