Blog FAQs
info@1300carmoney.com.au Mon - Sun 24*7
1300Carmoney: Car, Leisure, boat, Personal & Business Loans within one business day > Business Loan

Business Loan

Business Loan

Long-term loans are saviours for businesses that may need some cash. This is because long-term loans provide consistent financial support for an extended period. Thus, business loans help to take up opportunities and push the business ahead. 

What is a long-term business loan?

With long-term business financing, companies take out a fixed loan amount upfront and repay it with interest over time. Payment terms can be as long as 30 years or as little as 12 months. Businesses frequently have the option of applying for bigger loan amounts with longer payment terms. Long-term loans are more likely to be secured loans because the loan amount is often higher, and the payback period is longer. Alternative lenders may also provide choices for unsecured loans.

service-three

Short-term business loans

Short-term business loans are similar to long-term business loans but with shorter repayment periods. The repayment period varies between 3 and 18 months. In addition, short-term loans allow one to access the loan amount more quickly, say within 24 hours. In recent times, online lenders provide quick access and flexibility than traditional banks.

Secured vs Unsecured loans

Secured loans are availed by producing collateral. Collateral is any asset with a financial value. For mortgages and car loans, buildings and cars will be the collateral. In secured loans, the bank or the lender will put a lien on the asset attached to the loan. The lien is removed, and the assets are set free once the loan is paid off.

A few examples of loans with collaterals include:

  • Real estate
  • Fixed deposits and money market
  • Vehicle loans
  • Stocks, MFs, or bonds
  • Insurance policies

Unsecured loans are availed without producing any collateral. For example, credit cards, student loans, and personal loans are given without any collateral assets. Instead, unsecured loans are granted based on credit score and repayment ability. As a result, unsecured loans can have higher interests than secured loans and may include fees.

How to avail of a business loan?

To avail of a business loan in Australia, one must find an experienced finance broker. They will take care of finding the apt lender from their broad range of lenders list. Business loans may not require additional security and are mostly taken to cover expenses like wages, rent, expenses on advertisements, and acquiring assets like business vehicles.

There are a few requirements to be fulfilled while applying for business loans, such as:

  • Financial statement prepared by an accountant
  • Bank statements
  • Proof of individual income
  • Identification details
  • Business plans

What exactly is a small business loan?

Small business loans are used to cover expenses, payment of wages, or purchase equipment. They are a means to manage the cash outflow smoothly when costs exceed income. Anyone with a small business in need of cash flow can use these loans to cover expenses while waiting for payments from the clients.  

Small business loans are also used to raise capital, launch marketing capital, or run an ad campaign. 

Criteria to get a Business Loan

Remember the following steps and criteria before applying for a business loan:

  • Be clear about the purpose of the loan
  • Understand the potential cash shortfall and work out the loan amount
  • Calculate your repayment capacity
  • Decide about the secured and unsecured loan
  • Choose the interest rate that you prefer – fixed or variable interest rate
  • Have a complete understanding of the applicable charges
  • Keep your documentation ready
  • Consult with an expert

Business loan options and practices to avoid

There are many types of business loans to avail to start a business in Australia, such as:

  • Getting loans from friends and family with low or no interest
  • Line of credits
  • Business credit cards
  • Small business loans
  • Business overdraft
  • Working capital loans
  • Business term loans
  • Unsecured business loans

 

A business loan is the most preferred and flexible means to access cash in small, medium, and large businesses. However, there are a few things to avoid while availing of business loans.

  • Never present inflated books to the lender. Always keep the profit & loss balance sheet accurate for the lender to access the business scenario.
  • Several types of loans are available, and one has to do homework to avoid opting for a bad loan. The right business loan helps to achieve the objectives.
  • Documentation plays a significant role in any loan process and must be adequate. Improper documentation may result in the rejection of the loan.
  • Maintaining a credit score is as important as documentation in the loan process. A credit score ranges from 300-900 and determines your creditworthiness. A good credit score increases the chances of getting a loan.
  • Always submit complete details to the lender for the application to be processed quickly.

How to apply for a business loan?

Once you are ready with all the documentation, ensure you are prepared for the loan interview. Next, check for a cheaper financing option that is also genuine. Finally, clearly understand the interest rates and details regarding the lender. Always be ready to face the rejection of the loan proposal and educate yourself to make necessary changes to avoid issues while applying again.

FAQ's on Business Loans

  • One can get business loans up to $150,000 on the same day of application by providing bank statements.

  • The requirements to get a business loan include financial statements, proof of income, bank statements, identification, and a few more extra things if it is a start-up.

  • Long-term business loans are paid from 12 months to 30 years. Short-term business loans are returned between 3 and 18 months.

  • The loan amount depends on the lender, but one can typically borrow from $250,000 to $50,000,000 with a business plan.

  • Business loans can be unsecured loans that do not require additional assets. Instead, the loan is processed based on the strength of the cash flow and credibility.