Get a small business loan in 3 quick steps.
Our small business loan application process is transparent, easy, and fast. We’ve heard coffee orders more complex than our application process. In fact, applying for a Moula loan is like getting an espresso. And you’ll get a quick response. To apply, simply:
Friendly, professional and helpful…went above and beyond to help me secure the best loan for my situation. Thanks guys!
Garrett Huston – Mason Dixon
What are the types of small business loans in Australia?
Small business loans in Australia (like dogs) come in many different sizes. The trick is working out which one will be a helpful, loyal companion to help you grow your business. There are two broad breeds of small business loans:
A secured loan is borrowed against an asset, which acts as security for your loan. Because your asset offsets the risk of your loan, you can usually borrow greater sums at a lower interest rate. Because if you default on your loan, the business lender can reclaim your asset to make up for the lost funds. Some forms of equipment finance use the asset being purchased as security for the loan. The obvious challenge with this type of loan is owning an asset the bank values. More than 60% of business owners don’t have an asset they can use as collateral. This often makes unsecured small business loans the best finance option in Australia.
An unsecured loan is borrowed without the need for any assets as security. This makes unsecured loans accessible to business owners – especially small and medium businesses – that may not have any valuable assets. Because there is no asset to secure the loan, unsecured business loans have a higher interest rate and lower loan amounts, although Moula still lends up to $250,000. Loan amounts are based primarily on your business revenue as well as other factors such as your credit score and any ATO debt. You can find more about what affects the total cost of your loan below.
What are my
borrowing options?
You have a wide range of small business finance options, but working out the true cost of a loan can be difficult. Business lenders in Australia have been around for ages, but knowing what to look for in different loans could save you a lot of stress and money. Your options to access funds are to borrow from one of the big banks1 or an independent business lender. Each of these has its own strengths and drawbacks. So what are the best small business loans? The answer will depend on the needs and circumstances of each business.
Banks are bigger, so they can offer lower rates, and they generally offer secured funding, which is cheaper than unsecured funding. But this comes with a lot more paperwork when applying for a loan for small business. Applications usually require a lot of documentation, from submitting a business plan, to a heap of other forms. Business banks also have more restrictive eligibility requirements, which many small businesses in Australia cannot meet. All this takes a lot more time to complete – 6 to 8 weeks on average to get a loan approval answer. Banks also offer business overdrafts, business lines of credit and business credit cards. You usually can get these faster than a business term loan, but the interest rates will be higher.
Independent lenders in Australia are usually more flexible and generally have a larger risk-appetite, accompanied by higher fees to offset the risk they take on. Independent lenders can offer short-term unsecured loans for small businesses with faster and easier approval processes. This convenience of getting a quick business loan often comes with higher interest rates, so it’s best to assess your options on a case-by-case basis and always ask about the fees and total cost of the loan, including all fees.
What’s in a
small business loan?
There are five different parts of a small business loan, and each plays a critical role in the total, true cost of your loan:
- Principal is the total amount you’re borrowing
- Interest is the interest rate multiplied by the principal
- Term is the length of your loan
- Repayment frequency is how often you need to make repayments
- Fees/charges are often hidden or disguised
Every lender has unique criteria to evaluate how much they will lend a business, if at all, based on the perceived ability to repay the loan. This is called underwriting. Different lenders have different risk appetites – but more risk comes with a higher interest rate. And if it’s not, it’s a good idea to check for hidden fees and charges. Your annual turnover will usually be the biggest factor determining the maximum loan amount. Higher monthly revenues will show business lenders that your business can sustain a larger loan.
The general financial health of your business will also affect this decision, and lenders will typically look at other factors. These include your credit score, any debts, business finances, other loans you have/had, your industry and the age of your business.
Your interest rate is calculated by considering multiple factors, but is predominantly affected by the risk of your loan. Most of business lenders use risk-based pricing, which allows lower-risk businesses to access lower interest rates and, usually, more principal. Other factors that influence your interest rate include your industry and the performance of your business. The kind of SME loan you take out also affects your interest rate. Usually, a secured loan will have a lower interest rate than an unsecured loan. You just need that big asset to guarantee it, which can be easier said than done when seeking a loan for business.
The loan term is the length of time you have to pay off your loan. Generally, if you need a quick cash injection and higher repayments aren’t a problem, a shorter term will have a lower total cost. But if you need lower repayments, you can get lower repayments by increasing the fixed term to make it more manageable for cash flow. While the repayments are lower, there are more of them so the total cost of your loan will be higher.
Different small business loans have different repayment frequencies – ranging from daily to monthly. In most cases, the more frequent the repayments, the more expensive the overall cost of the loan. It’s worth checking for any fees associated with repayments too, because a small repayment fee charged daily can significantly increase the total cost of your loan. If that fee is hidden, it can be a very nasty surprise. Small business loan repayments are usually repaid in equal instalments.
Moula averages the principal and interest repayment amounts over the loan term, so there are no surprises – just the same repayment amount debited every fortnight. No fees, no surprises, no worries.
Remember insidious ATM fees? Small business loan fees are much more confusing, and there can be many more of them. Many lenders use fees and miscellaneous charges to maximise their profits from your loan. While one loan may boast a lower interest rate, the hidden fees and charges could mean it will end up costing considerably more than a fee-free business loan with a slightly higher interest rate. Some banks offer variable-rate loans, so you could end up paying more interest if the rate increases.
Great, so what about eligibility?
We started Moula to make small business lending easier, faster and transparent. So our eligibility is simple. All you need is:
- An ABN or ACN
- 6-months or more in business
- Minimum $10,000 monthly turnover.
Eligibility varies between lenders. It’s worth asking about eligibility early on to avoid the frustration of going through an application only to discover the lender requires you to own two or more unicorns and a football team to be eligible for small business finance. Our small business loans are 100% unicorn-free, guaranteed.
How is Moula different to other small business lenders?
The closest we’ve come to a shark is the flake at our local fish and chip shop. In fact, we’re so passionate about transparency in our lending, our favourite colour is clear. Because we know how valuable your time is, we built our application process around the fastest experience possible. If you’re unsure if you may have missed something in your research, read through our FAQs. It’s a comprehensive resource for business owners researching unsecured business loans in Australia.
Are you a business owner looking for a trusted loan with
no hidden fees and no hassle?
What do you need to get started?
Have questions?
We custom built our application processes to make it super easy to understand and quick to complete, but if you have any questions, we’re here for you.
We’re available from 9am to 5pm AEST via phone on 1300 88 09 72, live chat or email info@moula.com.au.