Categories

Accountant Aged Care Allied Health Andrew Bragg Annuity Apps Asic Asset Finance Asset Planning Asset Protection Asset Protection Strategies Assets Assets and Risks Ato Auction Audit Insurance Australian House Market Report Baby Bonus Bas Binding Death Benefit Nominations Binding Financial Agreement Binding Financial Agreements Body Corporate Bonds Borrowing Brexit Budget Budgeting Business Business Registrations Business Support Business Tax Deduction Business Value Capital Gains Tax Capital Gains Tax: Will Capital Protection Catherine Frost Cgt Checklists Commercial Loans Commercial Property Company Tax Concessional Superannuation Contribution Corporate Trustee Cryptocurrency Darren Foster Debt Debtors Deceased Estate Depreciation Dereen Wallace Director Director Id Divorce Economic Update Economy Emily Kermac Employees Estate Planning Executor Fbt Federal Budget Federal Election Finance Finances Financial Advice Financial Plan Financial Update Franking Credits Government Grants Gst Holiday House Home Office Hybrid Unit Trust Individual Ownership Insolvency Insurance Insurance In Super Interest Rates Investment Investment Loan Investment Loans Investment Property Investments Janet Kohan Jobkeeper Jobmaker Joint Ownership Ken Burk Land Tax Lending Life Insurance Linda Hamilton Loan Repayments Loans Lvr Margin Loans Margin Scheme Market Update Medical Expenses Mortgage Mortgage Broker Mortgage Broking Mygov Negative Gearing Offset Account Overseas Gifts Parental Leave Paris Financial Pat Mannix Payg Payg Variation Pension Practice Valuations Private Wealth Property Property Development Rebecca Mackie Record Keeping Redraw Facility Refinance Renovating Research & Development Retirement Retirement Planning Retirement Savings Salary Sacrifice Scams Self Managed Superannuation Self Managed Superannuation Fund Seminar Shares Small Business Smsf Smsf Borrowing Smsf Property Smsf Self Managed Superannuation Fund Steve Golding Steve Wildes Strategic Business Structuring Structures Subdividing Property Succession Plan Superannuation Superannuation Fund Tanya Hofbauer Tax Tax Benefits for Super Tax Concession Tax Deduction Tax Investment Property Tax Losses Tax Offset Tax Planning Tax Savings Tax-Free Temporary Full Expensing Tenants in Common Tessa Testamentary Trusts Tfe Training Transition to Retirement Trust Trusts Ttr Will Working from Home
Home » E-News » Latest News

A Simple Guide To Small Business Loans

A Simple Guide To Small Business Loans

Small business loans can be great when you need to get your brand up and running or cover unexpected expenses. However, it’s useful to understand the difference between the available options before committing to one.

To help you make the right choice, here’s what you need to know about some of the more commonly used business loans.

Line of credit/overdraft

A line of credit involves overdrawing on your business’s bank account up to an amount approved by your financial institution. This is commonly used for short-term capital, or as a source of cash flow to keep operations running smoothly.

Pros:

  • Flexible – use funds as needed and repay at your own pace.
  • Allows you to establish a good credit history for future borrowing.
  • Simpler application process than other loan types.

Cons:

  • The bigger the overdraft, the bigger the fees.
  • May incur fees even when not being used.

Bank term loan (secured or unsecured)

A bank term loan is a medium-to-long-term loan option commonly used for purchasing equipment or covering business start-up costs. It involves borrowing form a lender and making regular repayments over an agreed period.

Pros:

  • Flexible – choose from fixed, variable, split rate or interest-only loans.
  • Allows you to borrow a larger sum over a longer term, with lower interest rates.
  • May be able to match the loan term to the life span of the underlying asset.

Cons:

  • May be subject to borrowing minimums.
  • Attracts set-up and service fees.
  • Variable rates can fluctuate, resulting in higher repayments.

Mortgage loan

A mortgage loan can be used to cover most of the upfront costs of purchasing a property for your business. The property is then used as collateral by your lender until you’re able to repay the loan amount and the incurred interest.

Pros:

  • Flexible – choose from fixed, variable, split rate or interest-only loans.
  • May offer features such as redraw facilities and no-penalty early repayment.
  • May be easier to obtain than a bank term loan.

Cons:

  • May be subject to borrowing minimums.
  • Attracts set-up and service fees.
  • Variable rates can fluctuate, resulting in higher repayments.

Lease financing

Used primarily for equipment and vehicle purchases, lease financing means the lender owns the asset and charges the business a hire fee. At the end of the lease agreement, the business may be able to refinance or purchase the asset.

Pros:

  • Allows you to maximise the use of your working capital.
  • May entitle you to certain tax deductions.

Cons:

  • May be more expensive than other types of financing over the long run.
  • May be subject to hefty early termination fees.

Looking for the right business loan?

Understanding how the different commercial loans vary can help you choose one that best suits your business needs. Make sure you speak with a professional mortgage broker before making any decisions to ensure your business gets the right level of financial support.

 

© Advantedge Financial Services Holdings Pty Ltd ABN 57 095 300 502.