Did you know that 97.3% of businesses in Australia are small businesses?
Small businesses are the unsung heroes of Australia’s economy, creating jobs and driving innovation in all communities.
For your small business to thrive, knowing where to turn for financial support makes all the difference.
So stick around as we guide you through the best banks for small business loans in Australia.
The Importance of Small Business Lending
As of June 2023, Australia is home to around 2.5 million small businesses employing up to 19 people.
These businesses boosted the economy by 15% in the 2021-22 financial year, contributing a whopping $506 billion.
That’s one-third of Australia’s Gross Domestic Product!
Given these impressive contributions to the economy, it’s clear that having access to the right financing is essential for small business owners to sustain this level of impact.
How exactly can a small business loan help you?
Loans are the lifeblood for maintaining working capital, buying equipment, or expanding your business.
As you likely don’t have the same luxuries as large corporations with deep pockets and various funding avenues, reliable financing is critical!
Factors to Consider When Choosing a Lender
Interest Rates and Fees
We’ve all heard the saying, “There’s no such thing as a free lunch!”
All types of business loans come with interest rates and fees.
The interest rate is the cost of borrowing money, expressed as a percentage of the loan amount.
Fees can include application charges, monthly service fees, or early repayment penalties.
These costs add up and affect your bottom line. A low interest rate might look attractive, but high fees could offset those savings.
On the other hand, a loan with no fees but a high interest rate might be more expensive in the long run.
When comparing lenders, examine both interest rates and fees to find a suitable business loan.
Loan Amounts and Terms
Loan amounts and terms are another dynamic duo to keep an eye on.
The loan amount is how much money you’re borrowing, while the term is how long you have to pay it back.
Getting a loan that’s too small won’t solve your financial needs, and borrowing too much could lead to debt you can’t manage.
Similarly, a short loan term might mean higher monthly payments that strain your budget, while a longer term could result in paying more interest over time.
Balance is key. Choose a loan amount and term that align with your business objectives and repayment capacity.
Secured vs Unsecured Loans
A secured loan requires collateral, like property or equipment, which the bank can seize if you can’t repay your loan.
Unsecured loans don’t require you to put anything on the line but often come with higher interest rates as a trade-off.
What should you keep in mind when deciding which option is best? Secured loans usually offer better terms, but they come with the risk of losing your collateral.
Unsecured loans are less risky but could cost you more in interest.
Picking the option that works with your risk tolerance and business strategy will help you feel more comfortable with your loan.
Ease and Speed of Application and Approval Process
We all know that time is money.
That’s why the speed and simplicity of a loan application process can be a game-changer for you as a business owner.
Some lenders offer lightning-fast loan approvals and minimal paperwork, while others might have a more detailed and time-consuming process.
Why does the difference matter? Let’s say you have a golden opportunity to expand but need funds ASAP.
A lender with a quick loan approval process could be your lifeline.
On the flip side, a lender who takes time to scrutinise details might be a better fit if you’re navigating a more complex financial situation.
The lender’s application and approval process should meet your business needs and timeline.
That way, you won’t miss out on opportunities or get bogged down in red tape!
Relationship and History With a Particular Bank
It’s not always what you know but who you know that matters.
The same can be true when selecting a lender for your small business loan.
If you have a history with a specific bank, that relationship can be worth its weight in gold, or in this case, loan approval and better terms!
A bank that knows you and your business is more likely to offer a tailored loan package.
They might even speed up the approval process or waive certain fees because you’re a valued customer.
So, if you’ve got a good track record with a particular bank, consider sticking with them for your loan.
4 Top Banks for Small Business Loans
Let’s look at the amounts, rates, terms, and application processes offered by the four top banks for small business loans in Australia.
ANZ
The ANZ bank’s business loan amounts start at $10,000 and go up to $500,000 with fixed and variable rate options.
With the fixed-rate loan, your interest rate is set for up to 10 years, offering stable payments.
However, if interest rates decrease, you won’t benefit from lower costs.
While the variable rate loan means you’ll save money if interest rates drop, you’ll also be susceptible to rate increases, which could cost you more money over the life of the loan.
You can start your loan application online or over the phone by calling 1800 801 485 Monday-Friday, 8 am to 8 pm (AEST).
Alternatively, you can visit a local ANZ branch.
You’ll likely be asked to provide business financial statements and possible security like property or business assets.
Once your application is in, the bank will typically give you a response within a few business days.
CBA
For details on business loan amounts, you’ll need to speak with someone from the Commonwealth Bank of Australia.
The length of a loan term is tied to the type of collateral you offer.
- Home collateral: Terms range from one to 30 years.
- Business assets: Terms go up to 15 years.
- No collateral: Consult with a CBA Business Banker for available terms on an unsecured loan.
Rates depend on the loan term, amount, and type of security.
As of July 17, 2023, the CBA’s variable residential equity rate is 8.10%, and its variable base rate is 10.18%.
For information about their fixed interest rate, speak to a CBA banker.
To apply for a loan, existing CBA customers can apply in NetBank, and the application process should only take about 10 minutes.
If you’re eligible for a loan, you’ll get an instant decision and funds on the same day.
If you’d prefer to speak to someone at the CBA or are a new customer, you can book an appointment to talk to a loan specialist over the phone.
NAB
The NAB offers a QuickBiz Loan of $5,000 to $250,000.
This unsecured loan’s interest rate is 12.95% for up to five years.
You can apply easily online in 15 minutes.
You’ll need to provide
- Proof of identity.
- ATO Online Services Reports.
- Profit and loss reports.
- Bank statements.
- Transaction lists.
- A balance sheet.
- A copy of your trust deeds.
Then there’s the Business Options Loan.
This flexible loan has a fixed term of up to 30 years with secured and unsecured options available.
You can borrow a minimum of $20,000. The maximum amount and loan rates will vary depending on your circumstances.
You can apply online for a QuickBiz Loan or a Business Options Loan in 10 minutes with an active ABN or ACN, a business bank account number if you’re an existing NAB customer, and your business financials.
Westpac
Westpac offers several types of business loans.
With their Secured Business Loan, you can borrow from $20,000 at a variable or fixed interest rate, starting from 6.24%.
Then, there’s the Unsecured Business Overdraft for existing customers.
You can borrow between $5,000 and $250,000 with flexible repayment options.
And finally, there’s the Business Loan for Startups.
You can borrow between $10,000 and $50,000 with terms of up to five years.
Book an appointment online to speak to a Westpac loan specialist. Existing customers can apply through online banking.
To apply, you’ll need to provide documentation of
- At least one year of experience in a similar or related business.
- Up-to-date tax payments.
- A clear credit history.
- Your stable financial record with no recurring late payments.
- Financial statements and tax returns for the business and individual owners.
- Your personal income.
Need a Hand With Your Finances?
We hope this guide has helped break down the crucial factors to consider when weighing up loan options, interest rates, and terms offered by banks for small business loans.
We know the process can be daunting for you as a business owner.
So, for more comprehensive solutions to financing your small business and other financial matters like tax planning and wealth creation strategies, Pherrus is here for you.
Don’t wait to get in touch. Your business’s success depends on expert financial management!
Fill in our online form today or call +61 (02) 9099 9109 to book an appointment at our Bella Vista office in Sydney, NSW.