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How to get a business loan: the ultimate guide

Whether you’re running a small business, a big business or a new start-up, there’s a good chance that you’ll need some extra funding at some point along the way and will encounter the need for a business loan.

What is a business loan?

A business loan is a popular funding option among all types of Aussie businesses. Business loans are designed to provide the cash injection needed to help grow your operations and meet your everyday financial needs.

Like personal loans and car loans, taking out a business loan involves borrowing a sum of money and then paying it back in instalments along with interest paid at a fixed or variable rate. Business loans can be secured against assets, or taken out unsecured, though these generally have higher interest rates.

But is a business loan right for you?

Do I need a business loan?

If you’re reading this article, you might need a top up to your business bank account and are considering a business loan. 

Some of the most common reasons small businesses take out loans are:

  • To make big ticket purchase like business equipment or vehicles
  • To pay wages
  • To manage cash flow
  • To expand operations by hiring new staff or moving to new space  
  • To pay for inventory

A business loan isn’t going to be the right solution for every situation though. That’s why it may also be worth considering a business credit card, a business overdraft attached to a business bank account, invoice financing, or using any funds you may have stashed away in a business savings account.

Before you start the process of comparing business loans, it’s also crucial to work out whether your business is going to be able to afford one in the first place and whether its likely to meet the eligibility requirements. 

Business loan eligibility

The criteria you’ll need to meet to qualify for a business loan will vary between lenders, but some of the more common eligibility requirements you’ll need to fulfil to include:

  • Fully registered: Sounds simple, but the majority of lenders require borrowers to have an active Australian Business Number (ABN) or Australian Company Number (ACN).  
  • Minimum time in business: Many providers only lend to established businesses, which means that you’ll need to have been trading for anywhere between 6 months and 2 years (at the very least) to apply for a loan. That doesn’t mean there aren’t funding options for startups and new businesses, but the application and approval processes tends to be more stringent.  
  • Minimum turnover: Lenders need to be sure that you’ll be able to pay back the loan which is why many set minimum annual turnover requirements. These vary between lenders, but some lenders may require a minimum annual turnover of at least $40,000.  
  • Sound financial history: Your businesses previous credit history is also likely to be one of the factors lenders compare when assessing your eligibility for a loan. It’s also worth noting that an outstanding tax bill with the ATO could also impact your ability to take out a loan.

How do I compare business loans?  

Comparing business loans can be difficult, but we're here to help guide you through the steps of choosing between different business lenders, types of loans, and what exactly you should be looking out for.

Who can I get a business loan from?  

Once upon a time a business owner would need to walk into a bank branch in order to take out a loan, but not anymore! Borrowers now have a range of choices when it comes to taking out a business loan, and business loan providers generally fall into two main lender categories:

Banks and credit unions

Banks and credit unions are likely to be the lenders you’re most familiar with, especially if you already have a business bank account or business credit card set up with one of them. These include the four big banks in Australia of ANZ, Commonwealth Bank, NAB and Westpac, as well as major challengers like Bankwest, and Suncorp, and major credit unions.

Aside from familiarity, taking out a business loan with a bank or credit union can have its benefits, including:

  • Access to competitive rates
  • Greater options for startups and new businesses
  • Face-to-face service in branch
  • Ability to have all your business banking needs in one package

Online Lenders

The other option for business loans is to look at some of the new up-and-coming fintech business lenders which are based online. You might have heard of names like LumiProspa, Bizcap, OnDeck, Octet and ScotPac as innovators in the business loan field.

Some of the benefits of comparing business loans with online lenders include:

  • Low interest rates
  • Fast applications and approvals
  • Access to unsecured loan options

What are the different types of business loans?

If you’ve ever taken out a home loan or a personal loan you’ll know just how many different types of each loan are available, and the same is true for business loans. Some have different requirements and some are designed for specific needs, but a few of the most common types of business loans include:

Secured business loans

Perhaps the most popular type of business loan, secured business loans could be useful funding options for businesses that are happy to use an asset (like property, a vehicle or a piece of equipment) to secure the loan. Because they’re secured and a lower risk to lenders, secured business loans tend to come with the advantage of lower interest rates, which may be appealing for businesses wanting to keep their repayments as low as possible.  

Unsecured business loans

In contrast from secured business loans, unsecured business loans require no security to take out the loan. That could be a major plus for business owners who aren’t comfortable with using their own homes, cars or even the business itself as collateral against the loan. The downside is that lenders view these to be riskier loans, which is why interest rates tend to be higher than with secured business loans. They also tend to have lower maximum lending limits, with options ranging from $5,000 or $10,000 business loans, up to around $500,000. If you need more than that, you'll likely need something to use as security.

Equipment finance business loans

If you’ve got a specific piece of equipment (like a new coffee machine for your cafe or computers for your office), or perhaps a new vehicle (like a ute or van) that you need to purchase for your business, then a specialised equipment finance business loan could be right solution.  

Short term business loans

Whether you need to make some emergency repairs or just need some funds to cover you until your invoices are paid, a short term business loan could be a great option for businesses in need of a small funding injection, fast.

Rates and fees

When you're working towards your own business, you want to be putting as much money as possible back into it - and not spending it all on the costs attached to a business loan. That’s why it's important to pay attention to the two major prices you'll pay with regards to business loans - the interest rate, and the loan fees.

Business loan interest rates

Business loan interest rates work a bit differently to the interest rate that's applied on a personal loan or car loan. While these are always expressed in annual figures, business loan interest rates may be expressed weekly, fortnightly, monthly, or annually. For example, you might see a business loan offer with an interest rate of 0.67% per fortnight, or 0.90% per month.  

Some lenders don’t even offer an interest rates up front. Instead, you’ll need to complete an application after which you’ll be offered an interest rate customised to your business.     

While it might be a little bit more difficult to compare interest rates expressed over different time periods, most borrowers are still going to want to get the best rate possible to reduce the interest they pay. That’s why Mozo’s business loans comparison table can be a helpful tool to let you compare different rates on offer, all in one place.

Business loan fees

The other major cost to look out for when comparing business loans is fees. While a business loan may have the lowest interest rate, it could work out to not be cost effective when you factor in the various fees at play, so it's important to look at the cost as a whole.

Some of the more common fees you’ll want to compare include:

  • Application fees: Some lenders will charge an upfront fee when you are applying for a business loan. These can be a dollar figure, or a percentage of the total loan amount you borrow, but given they can be hundreds and sometimes even thousands of dollars, they’re certainly worth watching out for.
  • Valuation fees: These are charged by some lenders as the fees charged to value any collateral being used on a secured loan.
  • Ongoing fees: Otherwise known as a service or lender fees, these are charged for administration purposes and the general upkeep of the loan.
  • Late payment fees: These are the fees charged if you’re late making one of your repayments.
  • Exit fees: You may be charged a fee for paying out the full balance of your loan before the loan period is over.

Business Loan Features

Costs are one thing, and for many borrowers they’re going to be the deciding factor when it comes to making a choice, but the features of a business loan can also separate it from the pack.

Extra repayments and redraw facility

Some lenders allow borrowers to make extra repayments on their business loans which may be a great option to have if you’re looking to pay the loan off as fast as you can. This feature could be especially useful on large business loans up to $100,000, which you might be paying off for a long time otherwise. 

And if that sounds good, it may also be worth looking out for a business loan that comes with a free redraw facility as well. That way, if you do make extra repayments, you’ll be able to redraw them at any time and use them for other purposes.

Flexible repayments

When it comes to making repayments on your business loan, you’ll generally need to make them on a weekly, fortnightly or monthly basis. If you want to make your repayments on schedule that best suits your business, then it will be worth looking for lenders who offer flexibility and a variety of repayment options.

Funding speed

Whether you need funding in a hurry, or you’d just like to avoid the paperwork of a lengthy application process, finding a lender who provides speedy applications and funding could be worth keeping an eye out for. In fact, many online lenders provide both of these possibilities.

How do I apply for a business loan?  

One you’ve settled on a loan you like, it’s time to apply. Thankfully for borrowers, a lot of the hassle has been taken out of the process of applying for a business loan, with many lenders - especially the online lenders - offering much simpler, speedier applications. For most applications, you’ll just need:

  • A drivers licence
  • Your Australian Business Number (ABN) or Australian Company Number (ACN)
  • Financial data (including bank account and tax records)

In some cases, especially for start ups or newer businesses, you might also need to provide a business plan which outlines your position and how you intend to use the loan funds.

The business loan application process will differ between lenders and the type of loan you choose, with banks often taking a bit more time with approval and funding. Depending on the loan you apply for, applications could take as few as 5 minutes and funding could be done in less than 24 hours.

If you’re ready to start searching for a business loan to match your businesses’ needs, start with Mozo’s business loans comparison hub where you can filter and compare a range of loan offers.

Business Loan Comparison Table - rates updated daily

Search promoted business loans below or do a full Mozo database search. Advertiser disclosure.

Refine the list of business loans

Let’s help find you a great business loan...
  • Business+ Unsecured Loan

    A simple way to fund your business’s big plans. Borrow up to $50,000 without using your assets as security. A fixed interest rate means your repayments don’t change over the life of the loan. Apply in minutes with the Business app. Enjoy a fast approval process. $495 establishment fee.

    Interest Rate
    Upfront Fee
    Funding speed
    Rates range from 11.95% p.a. to 22.95% p.a.
  • Unsecured Business Loan

    Business Loans from $5,000 to $2,000,000 with high approval rates. Access to funds in as little as 3 hours. Cash flow friendly repayments and open minded offers.

    Interest Rate
    Upfront Fee
    Funding speed
    On Application
    3%, starting at $399
    from 3 hours
  • Unsecured Business Loan

    A straightforward business loan with no hidden Lumi fees or charges. Speedy application and approval process with fast access to funds according to Lumi.

    Interest Rate
    Upfront Fee
    Funding speed
    from 9%
    Within same day
  • Business+ Unsecured Overdraft

    Manage the cash flow in your business with ease. Access up to $50,000 without using your assets as security. Lending criteria apply. Access your available limit from your linked Business+ Account. Use your Debit Mastercard for added convenience. Interest is charged on your balance owing, not your limit. Easy online application. $495 establishment fee.

    Interest Rate
    Upfront Fee
    Funding speed
    Rates range from 14.95% p.a. to 25.95% p.a.
Tom Watson
Tom Watson
Finance journalist

Tom has over five years experience as a finance journalist covering everything from property and fintech to consumer banking.

Sara Borman
Sara Borman
Money writer

Sara has a Communications degree and has contributed to academic and literary publications in the US and Australia. She aims to bring an accessible point of view to credit cards and loans for Mozo readers.

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