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Entrepreneur loans in Australia – Launch & grow your business
Starting a business can be financially straining. Being able to borrow makes things better. But it’s not always easy to find a lender if your revenue or bottom line is still in the pits. Even if you’re an established business, you need a lender that sympathises with your struggles and offers tailored products that make your life easier.
Happily, our guide on entrepreneur loans will help you understand the best financing options for you and your business.
What are entrepreneur loans?
An entrepreneur loan is a financial product designed for all sorts of business purposes. Unlike personal loans, where you borrow for a personal reason like a holiday or wedding, entrepreneur loans are meant only to provide capital for growing businesses.
The main types of businesses that can benefit from entrepreneur loans are startups. These are different from small businesses in that they’re fresh on the scene and looking to develop and scale up their products and services quickly.
Therefore, a startup business loan gives these companies, sole traders, partnerships, or organisations the financial “legs” they need to stand on. Entrepreneur loans are also available to early-stage businesses that have survived the initial startup phase. Most companies that are just starting out (under two years) rarely meet the minimum turnover requirements. But some banks and alternative lenders are willing to overlook this.
Once you find a suitable lender and get right down to it, entrepreneur loans work like any other loan: You borrow a big chunk of money only to repay it via small instalments over a fixed period of time. Amounts typically range from as little as $500 to upwards of a million dollars.
What can you use them for?
Entrepreneur loans can service your business’s financial needs from top to bottom, including the following:
- Developing your service/product so it’s market-ready
- Hiring staff
- Renting business space or paying mortgage
- Purchasing startup inventory
- Marketing and advertising
- Taxes, permits, licences, and insurance
- Equipment, business furniture, and outfitting services
- Employee payroll
- Other startup costs and ongoing expenses
Common types of entrepreneur loans
Generally, the term “entrepreneur loan” encompasses the following types of financial products:
- Unsecured business loan. This is a flexible type of loan that doesn’t require security. It can cover many business activities, boost cash flow, or fund new business opportunities. Due to the lack of collateral, the lender faces a higher risk. Therefore, you may not be able to borrow larger amounts.
- Equipment finance. Equipment finance is designed specifically to buy machinery, equipment, and even vehicles for your business. The lump sum is usually secured by the asset you purchase. However, you can also opt to lease if you don’t want the additional cost of ownership.
- Business overdraft facility. This links to your business account so you can withdraw money when there are no funds up to a specific limit. Overdrafts are generally best for financing short term and smaller business needs or unexpected expenses.
- Business line of credit. This works similarly to an overdraft. You can withdraw money up to a specific limit without applying each time (revolving credit facility). When you reach the limit, you repay the balance so you can continue the cycle. A line of credit is, however, more suited for larger operating expenses and long term financial needs.
Other finance options for entrepreneurs
Some business lenders offer flexible personal loans that can be used for business purposes. The good news is most personal loans are unsecured. And as long as you have a decent credit rating and a regular income, you can get funding for your business.
You could also consider business grants from the government or other private agencies. Although these are not readily available, if you do your research well and find an option you qualify for, the free capital can take your business far.
How to choose the best business loan option
Searching for a suitable business lending solution means you’ll have to compare many options. The good thing is, it’s not as difficult if you know what to look out for. Here’s what you should keep in mind:
- Loan amounts. Borrowing limits depend on your ability to repay the loan. Your best bet is to choose the lender with the most flexible minimum and maximum limits.
- Loan terms. Your repayment period depends on how much you borrow and your cash flow. Start by working out your budget. If you choose an option with a lump sum payment and fixed repayments (instead of an ongoing line of credit), you can estimate how much you need to pay back using our entrepreneur loan repayment calculator. This ensures you only apply for what you can afford.
- Interest rate and other costs. Rates are either fixed or variable. You don’t always get the advertised rate since most lenders offer tailored rates based on your finances and credit file. It’s best to go with lenders that provide personalised quotes before you apply. From there, you can choose one with the lowest comparison rate (the comparison rate includes interest and standard fees, so it represents the true cost of the loan).
- Other features and factors to consider. Make sure your lender is a fully licenced and approved credit provider. Generally, you have better luck with a credit provider that specialises in small business loans for entrepreneurs. Additionally, features like a quick and easy online application, fast funding, online loan management, the ability to make additional or lump sum repayments, and a redraw facility to access your extra repayments can simplify the borrowing and repayment process.
Prepare your paperwork and details before applying
Paperwork requirements vary between financial institutions, but the list generally includes all or some of the following:
- Business details such as ABN, company structure, and location
- At least two years’ worth of tax returns
- Bank account statements
- Balance sheets
- Profit and loss statements
- A detailed business plan
- Proof of personal income
- Proof of ID
- Other business and personal info such as personal tax returns and business financial forecasts
How to apply for entrepreneur business loans online
- Click “Go to Site” in BestFind’s product table above.
- Once you reach your lender’s website, complete the application form.
- You may need to upload your supporting documents, or the lender will request them at a later stage.
- Submit your loan application and wait for the lender’s feedback. If approved, you accept the offer, sign a contract and receive money in your bank account.
Entrepreneur loans in Australia FAQ
Should I apply for a business loan from a bank or non-bank lender?
This depends on your needs. Typically, bank loans for entrepreneurs are regulated by APRA (the Australian Prudential Regulatory Authority). On the other hand, non-bank lenders are regulated by ASIC (the Australian Securities and Investments Commission), so both options are viable and safe.
Can I get a bad credit entrepreneur loan?
Yes, these are generally available from smaller, alternative lenders. However, having bad credit means you’re a high-risk borrower, so your rate will be higher.
How do I increase the chances of getting finance for my business?
Businesses with the following are more likely to get approved:
- Consistent revenue that comes from a broad customer base
- Fewer or no existing loan facilities
- Stable cash flow that’s not seasonal
- Low risk and strong trade
- Long time in business
- Clean credit history
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