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Business loan interest rates in Australia start from around 7.50-15% p.a. for secured loans and 12-20% p.a. for unsecured business finance. But rates can be higher than this on some business loans.
Your business’s personalised interest rate will be based on the lender’s criteria and their assessment of how risky it is to lend to you.
Type of business loan | Small business loans |
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Interest rates starting from | 7.50-15% p.a. |
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Type of business loan | Unsecured business loan |
Interest rates starting from | 12-20% p.a. |
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Type of business loan | Business line of credit |
Interest rates starting from | 8-15% p.a. |
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Type of business loan | Business overdraft |
Interest rates starting from | 8-15% p.a. |
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Type of business loan | Asset & equipment finance |
Interest rates starting from | 7.50-15% p.a. |
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Type of business loan | Invoice finance |
Interest rates starting from | 3-12% p.a. |
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Type of business loan | Fit-out finance |
Interest rates starting from | 7.50-15% p.a. |
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Type of business loan | Bad credit business loan |
Interest rates starting from | 18-20% p.a. |
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Type of business loan | Interest rates starting from | Compare now |
---|---|---|
Small business loans | 7.50-15% p.a. | |
Unsecured business loan | 12-20% p.a. | |
Business line of credit | 8-15% p.a. | |
Business overdraft | 8-15% p.a. | |
Asset & equipment finance | 7.50-15% p.a. | |
Invoice finance | 3-12% p.a. | |
Fit-out finance | 7.50-15% p.a. | |
Bad credit business loan | 18-20% p.a. |
Secured business loans generally come with lower interest rates, as there is less risk for the lender. A fixed-term loan could also come with a different interest rate than an ongoing line of credit.
For a secured loan, the asset being used as security will be considered. For example, for a business loan to purchase a vehicle, the age and condition of the asset will likely be taken into account. Newer assets that are in good condition will attract lower rates.
Businesses with a high level of annual turnover (e.g. $5m+) will qualify for lower business loan rates than a lower-turnover business.
Established businesses with a few years of trading history generally get lower rates than newer businesses. A minimum of 12 months' trading history is a common lender requirement.
Some lenders tailor their rates based on the industry the borrower operates in. As you’d expect, businesses in lower-risk industries often qualify for lower rates.
If the borrower providing a personal guarantee is asset-backed (i.e. owns a property), they’ll generally qualify for lower rates than a business borrower without assets.
With a lot of lenders, a credit score below 600 will make getting a business loan more difficult, with higher rates applying for low credit score borrowers who are approved.
If there are defaults, court orders or insolvencies in the borrower’s credit history, higher rates will likely apply. Likewise, if bank statements show the borrower has recent dishonoured payments or has been overdrawn on their account, this could impact the rate offered.
Borrowers with no outstanding ATO payments due will typically be offered lower business loan rates. If you are in arrears with the ATO but the payments are manageable you may still qualify but with a higher interest rate.
This isn’t always the case, but some lenders will vary rates based on the loan amount and duration of the loan. Again, the common theme is that greater risk means higher rates.
A business loan allows your business to borrow funds to purchase assets or access working capital for day-to-day operations and growth opportunities.
The business repays the loan, plus interest and fees, over a fixed term of between one month and seven years. Typically a business can borrow an amount of money relative to the level of revenue it generates.
You can get a business loan as a lump sum or an ongoing line of credit which you can draw on whenever you need, up to a limit. There are two main types of business loan:
A secured business loan is backed by a commercial asset or residential property which acts as collateral to secure the loan. In some cases, you may be able to use commercial property (e.g. your business premises) as collateral. Secured finance usually comes with lower interest rates and more repayment flexibility because there’s less risk to the lender. The lender can reclaim and sell the asset(s) if you default on your loan repayments.
An unsecured business loan is not backed by an asset or collateral. Because the loan isn't tied to any security, interest rates on unsecured business loans tend to be higher to offset the lender’s risk. That’s because if you default on the loan, the lender may not be able to recoup its losses. Your maximum borrowing amount may also be lower compared to a secured business loan.
"When structuring your business loan, the two key things to consider are: When do I get paid by my clients? What can I afford to repay on a daily, weekly or monthly basis? Once you know when you get paid and how much, subtract any relevant expenses and outgoings and your remaining amount should cover your loan repayments by at least 120%. Most lenders use what's called a 'debt to service cover ratio' and often look for the coverage to be at least 1.2x."
Andrew Beckett, Commercial Finance Broker.
Generally, the minimum eligibility requirements for a small business loan in Australia include:
You can get a small business loan with banks, specialist online lenders or through a finance broker.
Specialist lenders are known for providing fast approval. For example, you could be pre-approved for finance within a few minutes and unconditionally approved within 24 hours. That’s because these lenders often require minimum information and documents to assess your application.
You’ll be asked about:
Financial documentation you’ll be asked to provide:
If you’re borrowing more than $150,000, you will also need to provide:
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GET STARTEDGET STARTEDThere’s no one-size-fits-all business loan in Australia. In fact, there are quite a few different types of fixed-term business loans to suit different purposes, as well as lease options and ongoing credit facilities.
The type of finance that suits best will depend on your business, what it needs funds for and how soon.
According to Money.com.au borrower data, the top reasons businesses in Australia apply for a business loan are:
The average small business loan amount in Australia is $94,845, according to Money.com.au data. Here’s what businesses in different industries borrow on average:
Agriculture businesses request the largest loan amounts on average at $121,990, followed by road transport and freight business ($105,807), and cafes and restaurants ($101,104).
Currently, small business loan interest rates in Australia range between 7.50-15% p.a. Interest rates will be higher for unsecured business loans. The average interest rate for business loans varies as there are multiple lenders and loan products available in the market. That’s why it’s important to compare your options to find the best rate for your business.
Here are the three main ways lenders will advertise — and apply — interest on business loans:
Business loans generally come with standard fees, including:
Fees can significantly impact your borrowing costs, so consider negotiating with your lender to minimise them. Some lenders may even waive certain upfront fees to win your business.
Yes, you can use a finance broker to help you find the best rates on business loans and handle the application process for you, potentially increasing your chances of approval. That’s because:
Finance brokers are typically paid as a percentage of your loan amount by the lender.
Yes, most business loan applications require submitting your latest bank statements for the business, usually as electronic copies. This is the quickest way for lenders to assess your business revenue and determine if you can comfortably repay the total loan amount and interest.
If you can’t provide business bank statements, you may have to apply for a low doc business loan, for which you’ll be asked to provide an accountant's letter verifying your business income.
The application process for a small business loan is typically faster with a specialist lender than with a bank lender. That’s because specialist online lenders have less stringent eligibility criteria and use technology to assess your business information, credit report, and bank transactions.
No, you generally don't need an upfront deposit for a business loan. But, there are instances when a lender may require a 10-20% deposit. This usually applies if your business has been trading for less than two years or if you don't own property and want to borrow more than $150,000.
It's important to note that a deposit is not the same as security (collateral), and you must provide collateral if applying for a secured business loan.
New businesses or startups can apply for a business loan, but typically face higher interest rates to offset the lender’s risk of financing a business with little or no trading history.
Remember that you must still be able to provide financial documentation showing you can service the loan in full. Alternatively, some lenders may request work contracts as proof of ongoing work to assess your loan serviceability.
Newer businesses generally need finance to plug gaps in their cash flow and help get their business off the ground.
Yes, you can still qualify for a business loan if you have a poor credit rating (or no credit rating), although it will likely need to be through a specialist lender. Bad credit business loans are similar to standard unsecured loans but usually feature higher interest rates.
In most cases, lenders will allow you to repay your loan early, although early termination fees may apply. If you plan on repaying your loan amount early to reduce your interest payable, check with your lender up-front whether you’ll incur fees or penalties for doing so.
Make sure that early termination fees on a business loan don't offset the interest savings you’d make by paying off the loan sooner.
Yes, you can generally refinance your business loan, although early termination fees may apply. Refinancing involves paying off your current business loan with a new one. You can refinance by getting a new loan from another lender or by switching your current loan with your current lender.
According to CPA Australia, common reasons why a business may choose to refinance include:
Be sure to check that the fees you’d pay in the refinancing process don’t cancel out the benefit (e.g. getting a lower interest rate) of refinancing in the first place.
There are a few reasons you may be declined for a small business loan, including:
Business Loan guides and resources
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