Any type of available loan that meets the urgent requirements of a business at its initial stage is known as business loans. Business lendings in Australia reached a total of 7.9 billion dollars by September 2020.
One can attain these loans without pledging any asset or security, but that depends on the organisation. They usually have a specific repayment period of shorter duration than regular loans.
Business loans are very much essential for modern businesses. They allow the borrower to make on-time purchases and payments. Running a business can have its downsides, and lack of ability to make proper payment for services is one.
These loans are a boon for small businesses who don’t get the required capital for funding in the Australian economy.
Eligibility For A Business Loan
- A good credit score with no bounced payments and proper conduct of payments
- Regular payments of GST and PAYG updated to the recent transaction
- Account history for the previous financial year or the years before
- Clean credit with no defaults unless explicable
- Documents of bank accounts, identity proof and business ownership papers
Types of Business Loans
- Traditional: These are regular loans taken from banks using the usual paperwork and proceedings. They usually have lower interest rates with regular payments.
- BCC: A Business Credit Card allows the borrower to get money for a period of time without interest. For proof of authenticity, length of time in business and income amount is to be submitted.
- Overdraft: Business overdrafts allow the owners to run a negative balance to the credit in the account. They are required to pay interest for any funds overdrawn from the credit.
- Line of Credit: A business line of credit allows the user to borrow money from the bank, but they need to pay interest only on the amount of money used from the loan. These types of loans have the added flexibility of using only when required.
- Equity: Business equity loans are those that may use assets like residential properties as security or down payment. Such loans have affordable interest rates but risk losing the property in case of financial difficulty during repayment.
- No Documentation Loans: This type of loan doesn’t require a complete income statement or credit history to purchase a loan. They usually have higher interest rates.
- Unsecured: One of Australia’s fastest ways to get a business loan. Unsecured loans don’t usually have a lengthy procedure for securing the funds. The lenders analyse finances and banking transactions to fix the amount to borrow. These loans have quicker processing times and are easy to obtain.
Business Loan: When to Apply?
- Start-Ups: These type of loans are advantageous for start-ups to get an initial foothold in the market. They allow the initial stages of a business to run smoothly with lesser dependency in money.
- During Development: A business may have hiccups and setbacks during the growth phase. Loans allow such companies to purchase labour and capital for maintenance and growth. They will enable them to get extra money to deal with investors or capitalists without straining the customers or the staff.
- Expanding: Companies also take these loans to expand and upgrade certain areas of business. These can include machinery, marketing and labour that can incur higher costs for more resources.
Author bio: Helen Harry is a freelance writer and extremely fond of anything related to Digital Marketing and Business. She is writing Technologies as well as fiction, like good music, loves her cat and eats too much. More than anything, She loves to share the knowledge of Technology.