If you’re running a small to medium sized business, chances are you’ve taken out a business loan or thought about getting one at some point. Whether it’s to buy new equipment or hire new staff, a loan can be a good way to give your business the boost it needs. Below, we’ve compiled some tips to help get your application over the line and make sure you get the most out of your business loan once you’re accepted.
Consider challenger lenders over the big banks
For many people, the big banks tend to be most people’s first port of call when taking out a business loan. But while ANZ, Commonwealth Bank, NAB and Westpac account for 70% of all business loans issued, it would be a mistake to think they’re your best bet, especially considering there are thousands to be saved by looking elsewhere. Research recently conducted by the team at Mozo on business banking interest rates found that by opting for a challenger lender, you could save $6,007 in extra interest on a loan of $250,000 over five years.
Examine your business’ health
Once you’ve decided on a bank or lender, you’ll need to make sure your application is strong enough to make it over the line. How long has your business been operating? How much revenue does it bring in per month? These are the things a bank will be looking at when determining your eligibility. Ideally, you should have been trading for anywhere between six months and two years. Minimum turnover will vary depending on who you turn to, but it’s not unusual for lenders to require at least $40,000 per year.
Look for flexible features
When shopping for a business loan, it’s also a good idea to keep an eye out for features that will help you to save on interest. For example, the ability to make extra repayments will help you get ahead on your loan and save you money in the long run.
If you’re turning to a bank for you business loan, you’ll likely be required to put up an asset as security. Borrowing against your vehicle, a piece of equipment, or better yet, a property, will put you in much better standing in a bank’s eyes. And because you pose less of a risk, you’ll also be treated to lower rates. If, however, you’re not too comfortable offering security, you’ll be glad to know there’s no shortage of online business lenders out there who offer unsecured loan options. These lenders tend to have much more streamlined application processes and higher rates of approval. The downside is that their interest rates aren’t as transparent as the more mainstream lenders.About Peter Marshall
Peter is the business banking and product data expert at financial comparison site mozo.com.au. For the past 16 years, he has been analysing trends in the financial industry and tracking interest rates to help Australian businesses and consumers stay informed of their money choices. Peter is also one of the expert judges, who each year conduct analysis of Australian financial products and services for the Mozo Experts Choice Awards.