Business loans can provide additional resources to help your business access the finance it needs to grow.

Learn about what a business loan is, how it can help support your business activities, and what to keep in mind when taking on a business loan.

Running a business invariably involves a variety of overheads, costs, and financial input — some of which may necessitate external support. A business loan helps businesses access additional funds from lenders to fund an expansion of operations or growth, finance the purchase of specialised equipment, or improve overall cash flow.

There are different types of loans that will meet different requirements, each with its own unique conditions and loan terms. The key to determining which one is right for your organisation is to understand how each type of business loan works before you make the application for finance.

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With a business loan, businesses may borrow a specified amount of funds from a lender or bank and repay it over a fixed period of time. Businesses will usually have the option to choose between paying a fixed or variable interest rate, as well as the frequency of repayments (monthly, quarterly, or annually).

Depending on the type of loan, some assets may be required to serve as security for the loan, such as property, land, vehicles, or equipment. In cases where the business is unable to make the required repayments, the asset used to secure the loan can be repossessed by the lender. It’s also possible to get an unsecured business loan, where no collateral is required against the loan.

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How to Choose The Right Business Loan

Choosing the right business loan will come down to matching a finance solution with your business's current and future financial situation and needs. Working with a finance broker will help you to choose the most suitable loan that reflects what you need. Here are some of the key steps to take before deciding on a business loan:

  • Calculate how much you will need to borrow based on your business goals
  • Compare interest rates, repayment terms and fees
  • Evaluate the lender’s reputation and customer service
  • Look for flexibility in loan terms and repayment options
  • Review eligibility criteria and documentation requirements
  • Ensure the loan repayments are manageable to maintain a healthy cash flow for your business
  • Get expert advice from a finance broker

Why Do I Need to Get a Business Loan?

Most business loans will require applicants to provide the following:

  • A clear business plan outlining goals, financial projections, and repayment strategy
  • A strong credit history
  • Financial statements (profit and loss/cash flow statements)
  • Collateral – for secured business loans
  • Proof of business registration, licences and relevant legal documents

A business loan broker can help you to find the right loan for your business. Search our broker directory for an accredited broker.

Frequently Asked Questions for Business Loans

In general, your borrowing power will be dependent on the value and equity of the collateral you provide for the business loan, although there are a host of other factors such as credit score, current and past finance situations, and the type of business loan.

Before U Loan offers finance calculator tools to help you get an accurate estimation of how much you will be able to borrow on a business loan.

A fixed or variable rate will suit different business types. This ultimately comes down to what kind of business loan you are taking on, and whether your business is prepared for the pros and cons of either type of rate.

Fixed-rate business loans are ideal for managing your cash flow due to the interest rate being ‘locked in’. That being said, having a fixed rate also means that you won’t be able to make extra repayments to bring your loan term forward.

Comparatively, variable-rate business loans may result in changing repayment amounts over the term of the loan. If interest rates increase, the amount of interest you pay will go up, and vice versa. With a variable rate, however, you will have the opportunity to make additional repayments to pay off the loan earlier.

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