GUIDES & RESOURCES

Small Business Loans

When you’re running a small business you never know when you’ll run into the need for some ready cash, and that’s when you might decide to consider getting a small business loan.
Small business owners meeting
*iSelect does not arrange business loans products, but can refer you to Valiant who does provide such services and can help you compare business loan products. Valiant Finance Pty Ltd (ABN 95 606 560 150) holds Australian Credit Licence 500 888. iSelect and Valiant do not compare all providers in the market, or all products offered by all providers. If you click through to the Valiant website and acquire a business loan through Valiant, iSelect earns a commission from Valiant. Learn more

Easily compare business loans*

Find a loan for your business from over 80 leading lenders across Australia, powered by Valiant.

What is a small business loan?

A small business loan doesn’t have to be small, in fact it can be quite a large loan, made to your business for a number of reasons. These include purchasing new equipment or inventory, or even assisting with cashflow and hiring new staff. Loans vary but can usually be from as little as $10,000 up to around the $300,000 mark. They work the same way that most loans do. You borrow a set amount of money and agree to pay it back over an agreed length of time, together with interest. As ever, the variables vary between products and providers, and these should be considered when taking out a loan.

Why might I need a small business loan?

With most small business loans it’s up to you how you spend the money, so you can use it for a variety reasons, here are some examples:

  • Purchasing equipment: Growing your business can come with additional costs in the form of new equipment, such as a new coffee machine for a cafe, or a new business vehicle for a distribution business. These costs can be quite substantial, and so financing their purchase with a business loan can help manage costs more effectively.
  • Grow your business: A loan may give you the necessary funds to invest in infrastructure or staff that can help gear your business up to handle more work, make more money and grow.
  • Working capital: Also known as cash flow. Keeping your cash flow positive can have a positive effect on your business. A small loan may help you stay on top of day to day expenses and provide a handy cash buffer.
  • Grasp an opportunity: If an unforeseen business opportunity arises, you may not have the ready cash to take advantage of it. A small business loan could be the solution.
  • Pay an outstanding bill: It’s a fact of business life, unforeseen costs arise, and when they do, a small business loan may help you move through them without a hiccup.

If you have particular requirements, you may benefit from taking out a special loan, check out the iSelect pages if you need an equipment finance loan or a business car loan.*

What are the features of a small business loan?

As with many loans, a small business loan comes with different options, which can include:

  • Interest rate: As with any loan, you’ll want to compare the interest rates offered by different providers.
  • Fixed or variable rate: Being on a fixed rate loan gives you certainty about your outgoings and allows you to budget, but it also means you won’t be able to take advantage of lower repayments should the rates drop. On the other hand, being on a variable rate leaves you susceptible to rises in the market rate. It’s certainly an important factor to consider when comparing loans.
  • Fees: Different lenders have different fees, some have regular maintenance fees, others may just have an establishment fee, some will have both. It’s worth checking, as fees can make a difference to the affordability of your loan.
  • Extra repayments/Early repayment: Some loans will allow you to make extra repayments as you wish or even pay off your loan early, this is a good way to save interest payments. It’s worth checking to see if paying out your loan early will attract any penalty fees.
  • Redraw: If your loan has a redraw facility, you will be able to access any money in your loan from any additional repayments you’ve made into the loan. This can help lower your total repayments while having your money accessible should the need arise.
  • Repayment schedule: Check that your repayment schedule suits your business cash flow, to save incurring penalties for late or missed payments.

What are the different types of small business loans?

Small business loans are like many other loans, including personal loans and car loans, they generally come in two main types:

Secured loan:

A secured business loan is secured by an asset, typically the asset being purchased. It’s a physical security put up as collateral against the loan and includes such things as residential or commercial property, and business vehicles. Because the lender has the security of the asset to pay the loan, should the borrower default, secured loans usually have lower interest rates, and the lender may allow you to borrow more money. The downside is that you risk losing your asset if you default on your payments.

Unsecured loan:

Instead of requiring an asset to secure your loan, Unsecured loans are often based on your trading history, revenue, and credit score as a business. They can often be processed faster than a secured loan, but may attract slightly higher interest rates, and, because it’s unsecured, the loan amount may be smaller than if it was secured.

Ready to grow?

If you think a small business loan could be the helping hand you need, congratulations, you’re in the right place.

Compare from Valiant’s range of products and providers

At iSelect we’ve partnered with Valiant to make it easier for iSelect customers to find a small business loan that suits their business needs.* Valiant compares a range of products from over 80 lenders across Australia, and can manage the process of finding and applying for your finance solution, as well as settling funds. Get started comparing business loans online today!

Last updated: 18/10/2021

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