How to Get a Fast Unsecured Small Business Loan in Australia

Table Of Contents

Australian Small Businesses are the backbone of the Australian economy. As per a study published on Fundsquire, small and medium Australian businesses employ around 45.7% of the country’s workforce (source: Fundsquire).

Banks and the funding they provide play an important role in the growth of  Australian small businesses and startups.

Not only do banks provide accounts and cash flow management services; they provide an essential service ‘Loans for Australian small businesses’.

Now Small Business Loans play a crucial role in the survival of small businesses and startups.

As per an article published on BOQ’s website, not having the right funding when they need it is one of the top three reasons for the failures of Australian small businesses (source: BOQ).

Statistically speaking – In Australia, around 14% of startups end up having to close shop because of poor financial management and running out of funds to keep the business moving (source: Elegant Media). 

Moreover, loans have become more important than ever for small businesses as they look to consolidate and gather funds after a debilitating pandemic. 

there are a variety of small business loan options available for small businesses. 

While some of them are focussed on offering long-term loans while keeping a long-term business vision in mind. Some are purely focused on meeting short-term goals.

 In this blog, we specifically focus on ‘How to Get a Fast Unsecured Small Business Loan in Australia’.

The blog would cover all the topics and sub-topics around how to get a quick unsecured small business loan, worth anywhere between $5,000 to $500,000.

There is a possibility that you might be used to the idea of mortgaging an asset, such as a property, as collateral for a small business loan. 

While that provides security for the financial institution handing out the loan, it puts some added pressure on a loanee since failure to repay the debt will result in letting go of a prized asset. 

On the other hand, an unsecured loan requires no collateral. 

The lender will simply hand out the loan based on certain agreements and not require any asset to be leveraged in return. 

Most small, fast loans are unsecured since the loanee typically repays them in a very short amount of time. 

Let’s look at unsecured loans in detail before checking out how you can apply for one:

Understanding - Unsecured Small Business Loans in Australia!

What is an unsecured business loan?

An unsecured business loan is funding that can be attained without the provision of any collateral to the lender. 

The terms set for the loan and the amount are typically dependent on the loanee’s income, financial details, credit score, and other relevant details. 

Whether you are Starting an Online Australian Business or opening a small brick and moto store, these loans can provide a much-needed buffer to small businesses to manage cash flow without having to give up valuables or significant shares. 

However, these loans are obviously risky for banks and other lenders, making conditions for getting unsecured loans quite strict.

To understand the risks involved with unsecured small business loans, I recommend that you read this ebook from RBA – Access to small business finance

Despite the risks, having the right financial profile can still attract lenders since the loan is designed to aid small Australian businesses after all. 

Moreover, having a good relationship with your bank or lender can also go a long way in ensuring that you get the loan without much issue.

Key Features of Unsecured Small Business Loans in Australia?

Know more about unsecured small business loans

While the nature of unsecured business loans has been discussed in detail, it is still important to take a deeper look at them and see just how they can be beneficial to your business and interests. 

Key features of the fast unsecured small business loan are:

  1. The lender sets the criteria for the loan, with the main aspects they look at are the customer’s creditworthiness and repayment history. 
  2. They differ from most other loans as they do not require any collateral, which means that you do not have to submit any valuables to the lender to get the loan. 
  3. The terms and conditions for unsecured loans are usually flexible and repayment is done within 1 to 5 years. 
  4. Australian Banks may be strict in handing out unsecured loans as they usually do so to those businesses that have seen at least two years of profitability. 

Applicants for an unsecured business loan include startups, SMEs, sole traders, business owners, business directors, manufacturers, public companies,  MSMEs, partnership firms, and private companies – both small and large.

Factors deciding the Interest Rate on Unsecured Small Business Loans

Fast Unsecured Australia Small Business Loan

The interest rates for unsecured loans are quite high because of the amount of risk involved. Depending on how much you borrow and who you borrow from, the interest rate for an unsecured loan in Australia can go up to nearly 20% per annum.

However, the interest rate varies according to different factors, such as: 

  1. The financial history of the applicant
  2. The credit score of the applicant, which signifies their previous loan dealings
  3. The applicant’s creditworthiness, which is decided by the bank
  4. The repayment capability of the applicant
  5. The annual or expected annual turnover of the business

It is important to discuss the terms of your unsecured loan in detail with the lender before you sign any papers or agree to any demands, and interest rate should be the first question you pose.

What are the Different Types of Unsecured Small Business Loans?

Knowing the different types of unsecured business loans is just as important as finding out the interest rates. 

You need the right loan for your business and having a solid idea of the available options can help you with that. Furthermore, the documents and information you need will also vary according to the loan type.

The different types of unsecured business loans you can opt for are:

  • Working Capital Loan: A working capital loan helps deal with daily expenses, allowing businesses to make ends meet. Approval for a working capital loan is based on creditworthiness and repayment capacity. 
  • Term Loan: A term loan can be secured or unsecured. It is available for a specific period, during which it has to be repaid in EMIs. It is a highly common type of unsecured loan or loan in general. 
  • Overdraft: An overdraft involves a credit limit that is decreed by a lender which can be drawn on at intervals according to what the lender defines. The interest for an overdraft also varies according to the amount of credit available. 
  • Merchant Cash Advance: A merchant cash advance differs from the other loan types as it involves sales from credit cards that are deposited in a merchant’s account. The loan amount is defined by the number of credit card swipes or the monthly volume of a business at any specific time. 
  • Micro Loans: Microloans are offered by MFIs (Microfinance Institutions) to help borrowers make up for immediate cash shortfalls or requirements. A micro loan in Australia can range anywhere between $100 to $50,000, with the amount depending on the borrower’s requirement, repayment capability, and other features. 
  • Government Scheme Loans: Government scheme loans are offered to businesses by the state to facilitate funding at relatively low-interest rates. There are several government loan schemes currently active in Australia, such as the SME Recovery loan, which was launched to help businesses recover from the pandemic. Furthermore, government scheme loans are also offered at the state level. 
  • Business Credit Cards: Business credit cards can be used to obtain loans as well. It is a simple way of quickly getting some funds while staying within the limit agreed to with the lender offering the credit card. 

It is important to know which type of loan suits your business and your needs then. 

Make sure you have a lengthy conversation with your bank or lender concerning what you need and whether the loan you are applying for is indeed the best fit or not.

Are You Eligible for A Small Fast Business Loan in Australia?

are you eligible for a small business loan?

Checking your eligibility for an unsecured business loan is a simple process in Australia.

The two primary requirements are:

  1. The business entity is domiciled in the country; or
  2. The owner or an individual domiciled in Australia who is 18 years old or above. 

In the latter case, lenders tend to look at what the individual requires the small, fast loan for before they take a look at their credentials and other specifications required to take on a loan. 

Beyond this, eligibility for an unsecured business loan is highly dependent on the specificities of a lender. Individuals or business entities with poor credit ratings can also access these small, fast loans without much hassle if the lender is ready to loan out the money.

Where to Apply for an Unsecured Business Loan?

There are several institutions you can apply to for an unsecured business loan in Australia. 

Most banks offer the facility, with the bigger banks offering a significant range that accommodates small and large businesses alike. 

Along with banks, various non-banking financial institutions offer unsecured loans to businesses and individuals. 

However, the stipulations set by NBFCs can vary a lot and are stricter than the ones offered by the banks. Moreover, they also set higher interest rates. 

Finally, as discussed earlier, government schemes are nearly always active in Australia and aim to encourage startups and small businesses to perform better and grow with the extra funds offered to them. 

Still, it is a tad more difficult to get help from the government for daily expenses than it is with banks and NBFCs.

How to Apply for an Unsecured Small Business Loan in Australia?

Once you have all the relevant details noted down and vetted, it is time to apply for the small business loan, either online or through tedious paperwork. 

Here’s the process to apply for the unsecured small business loan: 

  1. Get an eligibility check done by sending your details to an experienced checker. This will help with anticipation and also give you another shot at getting all details down before you apply.
  2. Visit the financial institution or their website and give all the relevant details they demand. 
  3. Fill in any personal information they might require. It would be prudent to discuss submitting them with a manager or a stakeholder of the financial institution. 
  4. Submit the documents or online form once you are done and let the professionals handle the rest.

It usually does not take very long to get an answer from the financial institution you have applied to. 

After all, the very nature of the loan means that it needs to be checked and disbursed as soon as possible. 

Having the loan application rejected does not mean that you cannot apply for an unsecured loan or that you will never get one. 

You simply need to ask the financial institution why they have rejected your application and check which area you need to correct or work on. 

This is where having a good relationship with your bank is so important for small businesses. 

Having a dialogue with them on your financial dealings, and the successes or failures that affect them can help you build a better financial profile and secure funding more easily when it is needed.

3 Tips On Applying for an Unsecured Business Loan in Australia

Tips to get a Small Business Loan

You have essentially learned all there is to know about applying for a small, fast loan to help your business during the tough times. 

Unsecured loans can be applied for as many times as you need them, and both small and large companies make use of them. 

While the only thing that you need to be mindful of is the interest rates before you apply, make sure to think about these tips: 

1. Do Not Apply if You Own Personal Property

Avoid applying for such a loan if you own personal property. 

The financial institutions would much rather offer a secured loan in such a case. 

You will have to submit documents concerning your assets and their details to get the loan, and some lenders, especially NBFCs, will outright reject the loan request if you have a property listed. 

Therefore, make sure you do not apply for an unsecured loan in such a case. Getting a secured business loan is far easier in such cases. 

2. Keep Your Small Business Running Smoothly

Keep your financial operations running smooth and your professional relationship with the bank strong at all times to increase your chances of successfully obtaining an unsecured loan.

No lender wants to work with someone who does not have their house in order. 

You need to show stable finances and run your business in a way that inspires confidence from those who give it a cursory glance. Smooth business operations pave the way for smooth business dealings. 

3. Do Not File Low-Business Income Tax Reports 

If possible, avoid filing income tax reports if they are low. 

Lenders are looking for healthy businesses with strong repayment capabilities, and a low ITR would impact that.

In some cases, filing the income tax report is unavoidable due to the law. For that, it is important to highlight the years your business has seen solid growth and generated good numbers. 

As mentioned earlier, some lenders only agree to unsecured loans if a business has shown profitability for at least two years. 

So, you need to trust your numbers and bank on the success your business has seen over the years to get the attention you need from lenders. 

In conclusion, banking on a small, fast loan does have its risks, but you need to make sure you consider the option and work towards it for the sake of your business and its future success. 

And before we end the blog, here is a guide from CBA that lists eight steps to help you prepare for any small business loan.

May the financial forces (good ones) be with you!

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