Business Loans
What Is a Business Loan?
A business loan is a loan intended for business purposes, involving a debt that is repaid with interest. Business Loans provide different approaches for injecting capital into your business and come in various shapes and sizes to serve multiple purposes. Whether you’re a business owner looking for funding to raise working capital, cover a shortfall in day-to-day cash flow, or to simply take advantage when opportunity knocks, our finance broker Brin Hayden will help you determine the right loan and payment structure, then find the most competitive offer available and take care of the process from application to approval.
It’s worth noting that eligibility and requirements will vary according to the loan or credit you choose.
How do Business Loans work?
Business loans provide business owners with financing either as a lump-sum payment or a line of credit. In exchange for this funding, your business agrees to repay the money it borrows over time, plus interest and fees. Depending on the type of business loan, your lender may require daily, weekly or monthly payments until fully repaid.
Types of Business Loans
With different loan options available, knowing your business needs and aligning them with the right loan for your situation is essential. Options on the length of the loan, interest rates and terms will vary depending on your requirements. Some of the Business Loans Cabbage Capital can provide are:
Secured Business Loan
As the name suggests, this type of loan is secured against major assets such as vehicles, houses, land, commercial premises, or other assets. Secured business loans are ideal for raising working capital, purchasing a commercial property, expanding, or re-financing your business. Because the security guarantees the loan amount, interest rates are generally lower, borrowing amounts are higher, and repayment terms are longer than an unsecured loan.
Unsecured Business Loan
An Unsecured Business Loan is a flexible solution for businesses, typically lasting up to 24 months. Repayment options daily, weekly, or monthly installments for both the loan and the interest. Unlike secured loans, unsecured loans don’t require collateral, but they do come with higher interest rates, and generally lower loan amounts.
Unsecured business loans serve various purposes such as bridging cash flow gaps or seizing new business opportunities. With an unsecured business loan you can boost your working capital, invest in inventory, equipment, renovate, and even hire new staff.
Business Line of Credit
A Line of Credit is a flexible business loan that allows you to redraw funds as needed. It offers a revolving credit facility, meaning you can access funds up to your approved limit even as you make repayments. Once in place, you can access these funds without applying again. Typically, interest is charged solely on the utilised amount, not the entire credit limit.
This financing option can be utilised without restrictions for a range of business purposes including funds to purchase inventory, repair equipment, take on large orders, or cover day-to-day expenses when cash flow is tight.
Purpose of Business Loans
Whatever your business plans, there’s a Business Loan to suit your short-term needs or long-term ambitions. While there may be some overlap, your choice of loan type generally depends on what you’re trying to achieve.
Make major investments
Because a standard Secured Business Loan offers lower interest rates, higher borrowing amounts and longer repayment terms, these are ideal for high-cost purchases such as commercial property, business assets or entire company acquisitions, major expenditures to expand operations, or re-financing your business.
Boost working capital
An Unsecured Business Loan is more of a short-term facility (usually up to 12 months). Its most popular use is as a working capital loan for operational needs or to take advantage of new business opportunities. Invest in more inventory to fill orders, upgrade machinery, or cover new staff hires. Some business owners use it to protect against cash flow fluctuations.
Cover day-to-day expenses
The flexibility of a Line of Credit gives you a financial safety net that is ideal for covering short-term day-to-day expenses or gaps in cash flow. Have the freedom to take advantage of a bulk purchase price on inventory, replace or repair equipment, or pay necessary costs while waiting for a client to pay their invoice.
What are the benefits of Business Loans?
Business Loans have many benefits for small to medium enterprises and large companies to fund investment and growth. Choose what’s best for your business with secured or unsecured loans and flexible repayment options.
Capital to grow your business
Secured and Unsecured Business Loans allow you to borrow large amounts to fund major business projects, like expansion to other areas, provision of new facilities or upgrades to increase productivity.
Option of secured or unsecured loans
An unsecured loan may be more suitable to businesses growing rapidly or requiring quick access to funds. While a secured loan may suit a business wanting a larger amount of money they can pay back over a longer period, and generally at a lower interest rate.
Flexible repayment options
When choosing a loan, you can opt for either a fixed or variable rate, depending on whether it’s secured or unsecured. With a fixed rate you have repayment certainty. In contrast, a variable rate allows extra payments, reducing interest over the duration of the loan and often offers a redraw facility for accessing those funds later, or for extra payments to be made. Some lenders will allow a combination of fixed and variable rates in your loan.
Fast approval and availability of funds
With good planning and a properly prepared application, many lenders can approve your loan within minutes and provide access to funds within 24 hours of approval, allowing you to keep on doing the business.
Claim tax deductions
Set-up fees and interest paid on loans are business expenses that can be claimed as tax deductions in Australia. But it’s important to always seek tax advice before making a claim. If the loan funds assets that are partly used for private purposes, it may have tax implications. Also, penalty or late fees may not be eligible.
Maintain control of your business
Alternatively, taking out a Business Loan allows you to stay in control of day-to-day operations while still gaining the benefits of extra funds.
Am I eligible for a Business Loan?
To be eligible for a business loan lenders will require an accurate, up-to-date view of your accounts to prove the creditworthiness of your business. This will include a review of revenues, cash flow, existing credit, and how long you’ve been established. On top of this, they will generally look for:
- Australian citizen or permanent resident
- Own a business with a valid ACN or ABN
- Businesses must be GST-registered
- More than 12 months in business
- Provide business bank statements.
Understand Your Repayment Options
Based on whether your business loan is secured or unsecured, you can have a fixed or variable rate. It’s good to understand your repayment options before choosing a loan.
Variable rate
A variable rate loan will allow you to make extra payments to reduce interest paid over the life of the loan. It can also come with a redraw facility enabling you to make additional payments and access these funds later.
Fixed rate
A fixed-rate loan gives you the peace of mind of knowing how much your repayments will be. Fixed-rate loan terms are typically between 3 to 5 years. During the fixed rate period, there will be no fluctuation in the interest rate or the repayment amount for the agreement term.
Combined fixed and variable
Most business loans have a fixed or variable interest rate, but some lenders offer a combination of both. For example, you might have a loan with a fixed interest rate for the first year, followed by a variable interest rate for the remaining term.
Interest only or principal and interest
Some variable-rate business loans offer the option to swap between interest only or principal and interest repayments. Switching to interest only for periods of time allows you to lower your repayments to overcome cash flow gaps.
How to apply for a Business Loan
Source finance
Talk to us to find the best finance option for your business needs
Begin your application
We can begin the application process over the phone or in person at your premises
Submit documents
We’ll help you get your crucial information in order and finalise the required documentation
Receive finance
Lenders can often provide you with access to funding within 24 hours of approval
Why Choose Cabbage Capital as Your Finance Broker?
With over 20 years in the commercial sector, we know how to empower small to medium enterprises with the ideal financial arrangements to maximise their potential. We’ll listen first to understand your business. Then we’ll source the most competitive loan from our network of 30+ lenders to suit your situation. We negotiate the best rates and terms to give you even more value and manage the process from application to approval. We’re here to help you grow.
“Unlike banks or single product providers, we source finance from our network of 30+ lenders competing for your business. I’ll take the time to understand your business so we can source the best loan available to suit your situation.
I bring in-depth knowledge of the lenders, options, and facilities open to you. Then we’ll prepare your application to secure your business’s ideal loan structure and terms. We’ll shop around to identify and source the ideal arrangement for your requirements. And then negotiate the best rates and terms on your behalf.
And we’ll provide extra value, like letting you know which Business Loan expenses can be claimed as tax deductions.”
Every company needs access to fast and flexible funding to grow their business, from expanding operations to upgrading equipment, managing cash flow, or just keeping things humming.
Brin Hayden
Founder and principal broker
“Unlike banks or single product providers, we source finance from our network of 30+ lenders competing for your business. I’ll take the time to understand your business so we can source the best loan available to suit your situation.”
Let’s get started
If you’d like to book a meeting to discuss your needs or start a finance application, leave your details, and we’ll get back to you within 24 hours.
Alternatively, call Brin at 0418 574 655.