How to find the right $20,000 business loan for me
If you’re thinking of picking up some new equipment or need a quick cash injection to get a new project underway, a $20,000 business loan could be your best bet. But if you’ve never had to shop around on a loan before, you might be wondering how to know when you’re onto a winner. That’s where we come in. We’ve answered some of the most commonly asked questions when it comes to taking out a business loan.
What could I use a business loan for?
If your business is a little short on cash and is looking to grow or cover an expense, then a $20,000 business loan could save the day. And while what you use the money for is entirely up to you, some of the most common uses for this kind of financing are:
- Buying new equipment
- Paying wages
- Paying invoices
What kind of business loan can I get?
Here are the four types of business loans you may come across once you start shopping around:
Secured and unsecured business loans
Business loans are either listed as secured or unsecured - it’s important to understand the difference between the two, so you can help make a decision about which option would better suit your business. Secured business loans often come with lower rates, however, in order to get that low rate, you must provide an asset to be used as security, like your car. So in the event that you are unable to make your repayments, the lender has the right to reclaim you asset and sell it on your behalf.
On the other hand, unsecured business loans don’t ask you to offer up an asset as collateral. Unsecured business loans are also the more common type of loan you’ll see advertised, but these types of financing often mean higher interest rates.
Short term business loans
A short term business loan is often used by business owners in need of fast funding to pay for an unexpected bill or expense. They can be used for invoice financing, which may often appear as a line of credit.
Equipment finance business loans
This is a type of business loan that can be used specifically to purchase equipment. You might consider an equipment finance business loan if your equipment needs an upgrade or you’re looking to expand.
More frequently asked questions
How do I find the right loan for my business?
If it’s your first time shopping around for a $20,000 business loan, there are a few things you’ll want to compare. Not only can the right deal help you save a bundle, but it can give you the flexibility you need when paying off your loan.
The interest rate
These two features are possibly the most important features of any type of loan. Most of us recognise interest rates as an annual charge. Business loan interest rates are a little different and can be charged on a weekly or fortnightly basis. And if there is no advertised interest rate on a specific loan, it could be because the lender will offer you a customised rate if your application is successful.
Fees are another factor to keep your eye on, as they may come in many types. Upfront or ongoing fees are the more common fees you could come across, but others include valuation, exit or late payment fees. Keep in mind that these can add up over time and may see you fork out more than you initially bargained for, so be sure to pick a loan with minimal or zero fees.
Once you start comparing $20,000 business loans, you’ll soon find that many lenders offer different repayment schedules, like weekly, fortnightly or monthly. But in some cases, a lender may ask you to make daily repayments. So it’s important to carefully consider the type of repayments you’ll be able to afford making.
Last but not least are repayment features that can help you pay off your loan faster, such as extra repayments or a redraw option. Having the ability to make extra repayments to your loan can help you cut down on interest and get you out of debt quicker. And if you ever need to redraw the money for a sudden bill, a redraw facility will allow you to do so.
Can I take out a $20,000 business loan with bad credit?
If you’ve got a poor credit history, taking out a business loan for any amount can be tricky. Many lenders take into account both your personal and businesses credit history when determining your eligibility. So if either one or both look like bad news to the lender, your application may be denied.
If you do have a poor credit history, then you might want to consider exploring other options first, like using funds in your business savings account. It could also be worth repairing yours or your businesses credit history first before applying.
What do you need to apply for a $20,000 business loan?
Think you’ve found the right business loan for you? Great! Now the next step is to apply. Although the necessary documentation you may be asked to provide will depend on the lender, there’s a good chance you’ll be asked to provide:
- Your drivers license
- Your Australian Business Number (ABN) or Australian Company Number (ACN)
- Financial information, like your bank account and tax records