Having the capital you need to start your business or take it to the next level can be difficult. Banks may require you to have a certain personal net worth and show that you have a steady source of income before agreeing to give you a loan. Getting a business loan from another source might be your best option. However, with so many options available and different types of loans, navigating this process can be tricky.
If you are launching a new business or growing your existing one, these tips can help you get started on the right foot when it comes to financing your venture with a loan. Then check out our guide to help get you started on finding and getting business loans that fit your needs.
What Are Different Types of Business Loans
Let’s first learn about different options available when it comes to opting for a business loan to cover the finances of your business:
Secured Business Loans
A secured business loan or a commercial property loan is backed by collateral—usually residential or commercial real estate—to provide borrowers with lower risk and higher loan amounts. Lenders rely on the security asset if the borrower fails to make payments. In return, the secured business or commercial loan has lower risk and a lower interest rate.
Unsecured Business Loans
An unsecured business loan is one that does not require real estate collateral to approve. An unsecured loan is one in which the borrower’s credit and financial standing are the only determinants. Because an unsecured loan does not include an owned asset as collateral, lenders must rely on their own assets to cover any losses should the borrower default. Because of this, unsecured business loans have higher interest rates.
Low-doc Business Loans
Despite the fact that regular banks and credit unions are less willing to lend to low-doc borrowers, there are a number of specialized lenders that have the knowledge and resources to assess a borrower’s economic well-being in other ways. A low-doc business loan or low-doc commercial loan is likely to require real estate as security. Due to the higher risk to the lender, low-doc loans are more difficult to secure, so the lender will want adequate security to cover any losses if the borrower is unable to pay the next loan repayment.
Steps to Get a Business Loan in Australia
The very first step of getting a Business loan in Australia is to search for a specialized finance broker. They have connections to various lenders and will be able to connect with a lender suitable to your business type. With this not only you will get the best services but also save your time as well as money on searching and comparing the lenders on your own.
The second step is you should have knowledge of “business loans” and “commercial loans”. Both the terms are often used interchangeably but there is a slight difference between both. Business loans refer to the finances that are used to cover the actual expense of any business. These loans may be used to cover business advertising, overhead expenses, employee wages, office equipment, etc.
Whereas commercial loans are generally used to cover the premises or property on which the business is running or needs to run. It could also be used by professional investors for capital gain or rental income.
A business owner may require either a commercial property loan or a business loan. A business finance broker can assess your situation and discuss all of your options with you.
We, at Fincue, are specialized in connecting business professionals with lenders. With our Service-Laas platform and Mobile Technology, we can assist you in finding the best lender that suits your business type. To understand and learn more, please feel free to contact us.