A business loan can provide quick access to capital for general cash flow, to fund growth, or fill a gap while you’re waiting to get paid.
If you meet eligibility requirements the application process is relatively straight forward.
You can be funded the same day in the right circumstances.
In this article, we will discuss how these business loans work so you can fast track your way to a capital injection when you need it most.
Key Takeaways: Business Loans
| Term Loans vs. Lines of Credit | A Term Loan gives you a lump sum upfront that you repay over a set period. A Line of Credit allows you to draw cash when you need it. |
| Secured vs Unsecured | Secured loans offer lower interest rates and higher borrowing limits. Unsecured loans are faster to get but carry higher interest rates. |
| Personal Liability | Even with an unsecured loan, most commercial lenders require a Director’s Guarantee. |
| Speed of Funding | Business finance moves fast. If you meet basic criteria you can often get approved and funded on the same day. |
Types of Business Cash Loans
Before applying, you need to match your cash flow needs to the right product.
The structure, repayment, and cost vary significantly between facility types.
Both of the common types of cash loans could be secured or unsecured, and you’ll find that limits are higher and costs lower when the facility is asset backed.
Term Loan
A lump sum paid upfront that is anywhere from $5k up to $1 million.
Repayments are often made daily and over a fixed period of time, up to five years.
The mechanics are similar to a regular personal loan except with a much higher repayment frequency.
Line of Credit
Used as a revolving credit facility so you can access cash only when required, and can repay as the money flows back in.
This is a great tool for smoothing out cash flow gaps without taking on a large fixed commitment.
Secured or Unsecured Business Loans
This form of commercial finance does not require any form of security.
However, an unsecured business loan will not protect you from all recourse if you fail to repay the loan.
It just doesn’t link your funding to any one particular security.
A secured business loan is backed by specific collateral like property, vehicles, equipment, or even financial assets.
General Security Agreements (GSAs) and Directors Guarantees are also used for the same purpose.
The latter can also be applied to an unsecured loan in some cases.
This provides a clearer pathway to recovering funds if you default on the loan. As a result, a lender can usually offer lower pricing.
Whereas unsecured finance bypasses all of this, allowing for faster processing times.
The cost will be higher as the risk to the lender is elevated, and you will still be on the hook if you default on the loan.
There will just be extra legal steps required before a lender can make a claim against your assets.
How a Business Loan Application Works
One of the benefits of a business loan is that you can go from enquiry to approval within a matter of hours if all the required documentation is available.
While there are a lot of steps involved, you can navigate them in minutes rather than weeks if you have a professional in your corner.
- Enquiry and quote
- Application submitted
- Assessment and underwriting
- Conditional approval
- Conditions satisfied
- Documents signed
- Funds settled
Get in touch with the team below to kick start this process and you could have funds in your account before the end of the day.
Minimum Eligibility Criteria
As long as your business is not currently in arrears on any other forms of finance, you can be eligible for a business loan with some very basic criteria:
- ABN registered >3 months
- Guarantor Credit Score >200
With some lenders have low-doc options that can make the application process quick and easy.
This means you are not be required to submit financial statements, and as long as there are no major problems in your credit report then approval is straight forward.
A directors guarantee will also be required in some cases.
However, the stronger the credit profile of guarantors and the more complete the documentation the more lender options would be available.
But the minimum criteria to obtain some form of finance is relatively easy to meet.
Find the Best Deal
Prior to submitting an application the team at Gusto Finance will assess where you can get the best finance deal for your business.
The minimum eligibility criteria above is just the baseline.
Your options can also depend on a combination of the following:
- Industry
- Operating history
- Banking activity
- Revenue
- Security available (if any)
- Desired credit amount
After a preliminary assessment is complete we can match you with the best lender for your circumstances.
Application Process
Depending on the choice of lender, your broker will compile all the required documents to ensure a smooth assessment process.
We will also be in contact with the lender directly to ensure that all information is complete and appropriate context is provided.
Approval and Funding
Once the application is approved, contracts will be issued relatively quickly and funding can take place the same day in most cases.
How to Compare the Cost of Business Finance
Two loans with the exact same interest rate can have vastly different total costs due to the fee structure.
Unsecured options charge higher rates in exchange for increased flexibility and rapid settlement speed.
To calculate your total borrowing costs you’ll also need to factor in these common charges:
- Establishment or origination fees
- Monthly account keeping fees
Being unsecured, you can avoid valuation fees that often come with secured commercial finance.
Other costs to consider if you do not fully uphold the contract can include:
- Early exit or break costs
- Default penalty interest rates
Prior to signing the agreement you will be provided with an itemised schedule of fees. You can review this with your broker prior to the contract signing.
How to Speed up Approval
You can avoid most potential delays by using a broker and being transparent with your finances from the start.
This includes any debt that may not be immediately visible, such as an ATO debt.
Lenders will find this and by being upfront we can place you with a lender most likely to approve your application.
Other ways to accelerate your business loan approval can include:
- Provide clean bank statements so transactions are easily identified as business use.
- Respond quickly to questions.
- Ensure documents required are provided promptly.
Frequently Asked Questions
What is the difference between a secured and unsecured business loan?
A secured loan is backed by physical assets like property or vehicles. An unsecured loan does not require a specific asset upfront. However, unsecured lenders usually still require a Director’s Guarantee or a General Security Agreement over your business.
Can I get a business loan with bad credit or a previous default?
Yes, you can secure funding through specialist non-bank lenders. You should expect higher interest rates and stricter loan structures. To improve your odds of approval, you must show stable recent income and clean banking conduct.
What documents do I need for a low-doc business loan?
Low-doc business loans rely on alternative income evidence for self-employed applicants. You will typically need to provide recent bank statements, BAS records, ABN registration history, and personal ID. Requirements vary based on the lender and the loan size requested.
Are business loan interest and fees tax deductible in Australia?
The interest charged on your business loan is generally tax deductible if the funds are used for income producing purposes. The principal loan amount you repay is not deductible. Upfront borrowing costs and ongoing fees may be treated differently depending on the timeline. You should always speak with your accountant to confirm your specific tax position.
What happens if I default and there is a director’s guarantee?
A director’s guarantee makes you personally liable for the business debt. If your company defaults, the lender can legally pursue your personal wealth and assets to recover their money.
Executing Your Business Funding Strategy
If you are looking for fast cash to support your business operations then the path of least resistance is to apply through a broker.
They can achieve the following in quick time:
- Match the loan to your credit profile and business purpose.
- Align with security requirements (if any).
- Help you understand the total cost of finance.
- Prepare a clean document pack for fast assessment.
With the right support you can have funds in your account the same day so you can get back to running your business as soon as possible.
