Small Business Loan In Melbourne

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Break Free Home Loans are a leading Melbourne mortgage broker, with over 20 years of industry experience. We provide lending solutions and advice tailored to your needs. We work closely with clients as trusted advisors and are accessible to clients when needed.

Our brokers work hard at understanding our client’s unique circumstances and helping them overcome common home loan challenges. Whether you’re a first home buyer or an experienced investor, we’ll help you find the best home loan for your situation. Whether you’re self-employed and have trouble proving your income or you’re a contractor or casual worker, we offer solutions for all types of clients’ income sources.

Getting a small business loan that’s right for your needs can be difficult. You want to get the most value, the best interest rate, and repayment term. Work with an experienced broker from Break Free Home Loans to compare the best small business loans from various Aussie lenders. We ensure a stress-free loan application process for successful loan approval.

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What Are Loans For Small Business

A small business loan can help you stock your shelves, purchase new equipment or expand your operations. Business owners can apply for small business bank loans, loans from online lenders and community lending institutions. Banks typically offer loans for small business entities with low interest rates and competitive terms. However, they are difficult to qualify for. You will usually require collateral and a strong credit to apply.

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Best Small Business Loans

Funding options for small business loans include banks, term loans, business lines of credit and equipment financing. The best way to secure the best option for your small business financing will depend on considerations such as:

Why you need finance
How fast you need access to capital
How much capital you need
Your business’ eligibility — state of finances, income level, length of operation, industry
Total cost of debt you can afford

Once you’ve appraised these factors, you can find an affordable loan that suits the needs of your business.

Requirements For Getting A Small Business Loan In Melbourne

Business loans for small business entities will require stricter verification than loans for large well-established businesses. But while getting a small business loan can be a challenge, it can be done. You need to get a loan that you can afford. Getting a loan with the right lender will meet your needs, providing you with the most value without interrupting your cash flow.

The eligibility criteria for borrowers vary from lender to lender. Generally, however, you need a year or more of business history and revenue to qualify for small business lending. Startups operating for less than a year should consider other financing options. The following are some things you’ll need when you prepare your loan application:

Finance Statements

Depending on the lender, you’ll need financial documents such as bank statements, income statements, cash flow statements and balance sheets in the application process. When offering loans to small business entities, they may also ask applicants to sign a personal guarantee. They will need to review your asset, liability and net worth position as well as your income and expenses to determine if you can meet your existing and proposed repayments.

Tax Returns

When applying with online lenders or private business loans lenders, you need to provide your tax return transcripts. Lenders will verify this information to evaluate if borrowers can be fiscally responsible when they take on the loan. If for any reason you’re behind on your tax filings, you’ll be expected to show proof of an extension alongside a written explanation of why you had to extend your deadline.

Business Entity Domiciled In Australia

Your business needs to permanently reside in Australia. It means your income and assets are located on Australian shores. To prove this, you may need to provide some business documentation. This may vary depending on your business structure. Examples may include:

Business licences and registrations allowing you to conduct business
Articles of incorporation
Contracts with third parties such as clients or suppliers
Trust deed
Franchise agreements
Leases for commercial real estate or business equipment

Investment Purposes

Lenders want to know what you will be using the finance for. You need to have a clear picture of what you will be doing with the loan. Have detailed information and realistic calculations on hand to support your numbers. For example, if you need a piece of machinery for a manufacturing business, you should have quotes from the companies who supply this equipment. If you’re trying to repair or renovate the retail premises of your startup, you need to have your workings sorted. Include all costs, whether that’s purchase price, delivery and installation. You may be asked to supply a business plan. This is a common requirement for those seeking online loans or bank loans for small business entities.

Statutory Payments

This refers to any outstanding payments and debts your business currently has. This can include providing information on record keeping and payslips for your employees, tax owed to the government, invoices owed to suppliers, creditors and other payables. You can simply compile this in a business debt schedule that details your monthly payments and shows your interest and payment dates. Not only will a debt schedule be personally useful, it will help you keep track of bookkeeping and forecasting to make sure you never miss any debt payments. It also protects your business’ financial health in the long run.

Credit Report

When applying for a loan for small business entities, your lender may request a business credit report. Make sure that all the information is accurate and up to date. Any late payments, defaults or judgments will create difficulty in getting a business loan.

Assets Or Capital

You may be asked to provide assets or capital as collateral if lenders consider your loan higher risk. This can be anything you or your business owns that you’re willing to risk losing if you default on the loan. Examples of collateral may include real estate, vehicle, equipment or inventory you use in your small business operations. You may also include business savings.

Income

Lenders will check your income statement to see if your cash flow is reliable enough to stay on top of your repayments. They’ll review whether you have the ability to cover your usual expenses and any unexpected costs on top of your loan obligations. They need to see an updated statement of your business’ revenue and expenses as well as records from the past two income years. They may also request your most recent tax returns and notices of assessment if you happen to be a shareholder or director in the business.

Things To Consider When Choosing A Loan

When comparing small business loans Melbourne lenders, you need to consider these factors:

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Rates

The interest rates on a loan for small business needs to be competitive. You need to choose between a fixed or variable rate interest. A fixed rate allows you to have predictable repayments over the term of the loan. A variable interest rate will change over the life of the loan and make your repayments fluctuate. You also need to calculate the APR, which is the true cost of the loan that takes into account your annual interest.

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Fees

Make sure to review the fee structure of the loan if there are any upfront or ongoing maintenance, administration, and penalty fees. These charges will affect the cost of your loan so it’s best to check the finance details carefully. If you find a much cheaper finance option that sounds too good to be true, find out why. Are the fees much higher than usual? In cases like these, low interest rates are offset by fees. Ideally you need to get your LVR as low as possible so you’ll be offered the best terms.

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Repayment Terms

Are your repayment terms flexible? Is there a limit for additional repayments or early repayments? Restrictive terms won’t allow you to repay your loan off sooner and reduce the amount you pay in interest. Are there any charges or penalty fees if you break them? Pay attention to your repayment schedule, amounts and conditions.

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Deposit

There is no set deposit amount for business loans. When lenders ask for one, they usually need 10-30% of the loan value as a deposit. Furthermore, a secured loan will often ask for a collateral but no down payment.

Types Of Small Business Bank Loans

Are you hoping to make your next purchase, manage your cash flow or expand your business? A business loan or overdraft will help you finance your goals. The following are some of the most popular small business finance Australia options:

Secured Loans

These are traditional business loans where you need to complete a large amount of paperwork and go through a long approval process. With a rigorous approval criteria and an asset security required as collateral, these loans offer more competitive interest rates, starting at 5%. However, for a small business to qualify for a secured loan, they need to have very good credit scores.

Unsecured Loans

This is how small to medium businesses get the finance they need without having to go through a complicated lending process. Unsecured loans generally offer higher interest rates than secured loans because there is a bigger risk for the lender without collateral involved. They have a quick and straightforward approval process that appeals to business owners who need financing on short notice.

Credit Line

A business line of credit gives you access to flexible cash. You won’t need to make payments or get charged interest until you use the funds as needed. Lenders only charge interest on the amount you use and not the entire credit limit. Credit lines are best for managing cash flow, handling unexpected expenses and financing short-term business needs. You get to repay the loan at your own pace. However, business lines of credit start at $50,000 AUD minimum so it’s not suitable for those looking to borrow lower amounts. In Australia, the interest rates on credit lines can range anywhere from 5% to 12% per annum.

Equipment Finance

A form of asset based financing, equipment finance uses the asset you’re buying as collateral for the loan. It’s a specialised form of lending dedicated for purchasing machinery or equipment. You get to own the asset immediately with a loan amount up to 100% of the value of the equipment, plus soft costs. This includes your installation, delivery, warranties, assembly and other expenses to get your equipment up and running. With an equipment finance loan, you’ll make regular repayments over the term of the loan, usually three to five years. The interest rates can range from 6% to 15% for equipment loans.

Other

There are also other finance options you can pay back over time with interest. Examples are business equity loans, invoice financing, personal loans and business credit cards.

Alternatives To Small Business Financing

Invoice financing is another way to have immediate cash. By working with an invoice finance company, 80-95% of the total value of your unpaid invoices are paid off to you minus an advance fee (2-5% of the invoice amount). The remaining funds are yours when the customer pays the invoice. It’s a good option when you don’t want to wait to receive money, but you’ll still be responsible for their invoice collection. However, invoice financing interest rates on an annual basis will be higher than other types of loans.

A personal loan for business can be a good option if your business is young and you don’t qualify for traditional financing. Personal loan lenders review your personal credit score and income rather than your business history.

A business credit card gives you revolving credit and is a great option for short-term expenses. It’s usually easier to qualify for a business credit card than a small business loan. While credit limits are usually smaller than a line of credit, business credit cards may offer rewards such as cash back or travel points.

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Do You Have Any Questions?

Break Free Home Loans can help you apply with the right lender and find the perfect loan for your needs. We can guide you and provide comprehensive financial advice for every stage of your business journey. Talk to us today to begin your loan application.

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Frequently Asked Questions

The following are some of our most frequently asked questions:

What Are Requirements For A Small Business Loan?

Typically, you will need to share financial documents like tax returns, bank statements and cash flow statements when you apply for a business loan. You may also be asked to sign a personal guarantee. Most lenders require your business to meet a certain income threshold and be in operation for the past two years. Your business must be located in Australia and you need to have good credit to qualify.

How Much Deposit Do I Need For A Business In Melbourne?

As every business is unique, so is the deposit requirement for business loans. When lenders ask for a deposit, they usually require 10-30% of the loan value.

What Are The Main Types Of Small Business Bank Loans?

The main types of small business bank loans are:

Term loans
Secured loans
Credit lines
Equipment finance

Additional funding options from other lenders include:

Unsecured loans
Invoice financing
Startup financing
Sole trader loans
Business credit cards
Personal loans

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