How Much Deposit Do I Need for a Business Loan?

Do you need a deposit when applying for a business loan? Learn more about how much you need to pay upfront here.

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, updated on September 4th, 2023       

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Business loans are a handy way to cover expenses in a shortfall, or upgrade equipment that will then improve your business, but many may struggle to pay a significant lump sum upfront. Find out more about business loans and how much of a deposit you’ll need in Savvy's handy guide.

How much deposit do I need for a business loan?

The good news is that to get a small loan for your business, you don’t actually need to have a deposit. There are various types of business loan – most notably unsecured business loans – that don’t require any money upfront. This is handy, as it means you don’t need to have between 10% and 30% of the loan amount already in the bank (which is the commonly expected range for a loan deposit).

An unsecured small business loan is a type of loan which doesn’t require any security or collateral (so you don’t need an asset to offer) as part of the loan application. Depending on the lender, some might charge an upfront fee of a few hundred dollars, or in some cases a small portion of the loan amount (2%-3%). This isn’t universal, though, and some lenders have no upfront fee at all.

While unsecured business loans are a little more expensive than some other types of loan due to their higher interest rates, the trade-off is that they’re quick to process, easy to get approved and don’t require you to have a reserve of cash to get one. This is because of the lack of necessity on the part of the lender to assess the suitability of your security as part of the loan, speeding up the process.

If you’re in the market for a small business loan and you don’t have a lot in the way of a deposit, Savvy’s a great place to start your search. You can compare your options from some of Australia’s top lenders for an affordable unsecured small business loan and find the best one for your situation.

Is there any advantage to offering a deposit for my business loan?

Potentially. While you don’t need a deposit for an unsecured loan, doing so can certainly help your situation. Loaning money is all about risk from a lender’s perspective, namely the risk that they’re not going to get their money back. Offering a deposit now means you have something invested in this loan, which generally lowers the risk as far as your lender is concerned.

If you’re right on the line in terms of whether you’ll get a certain loan approved, a deposit might sweeten the deal enough for your lender to approve you. In Australia, offering a deposit may mean that you’re offered better interest rates, so it’s worth considering if you have the option. You need to weigh up those benefits against the value of having that deposit money available for other uses.

How else can I improve my business loan terms?

Frequently asked questions about deposits for a business loan

Do I need a deposit to loan money for a start-up business?

No – you can get unsecured loans as a start-up business, subject to approval. Given your business might not have much of a track record at that point, you might find your own credit history coming in to play more as you apply for the loan. You may also need to provide your lender with records of your finances to date, and probably a detailed business plan that shows how you’re going to get the business going, and what you’ll use the money for.

How much can I borrow with a no-deposit unsecured business loan?

Many lenders have maximum amounts in the $200,000 – $300,000 range for unsecured business loans, while some can offer more. However, how much your business can borrow will depend on the lender and your own situation. In Australia, you may not be offered the maximum $300,000 business loan if you’re a new start-up with an average credit rating.

If I’m unsure about offering a deposit, is it wise to mention it to a lender?

Yes – you can generally have an open conversation with your lender about the possibility of a deposit and whether that would improve your terms or help get you approved. They’ll normally just let you know what your options are and let you choose.

If I have a suitable asset available, is it a good idea to offer it as collateral?

There are pros and cons to both. While a secured business loan comes with very good interest rates in Australia, there’s a little bit of risk to your asset if you hit trouble and can’t pay the loan. You also lose some control of the asset, so, for example, if you’ve offered a large commercial vehicle as security on a business loan, you can’t upgrade that vehicle until the loan is paid off unless a suitable arrangement is reached with your lender to replace the collateral.

Do I need to repay an unsecured loan more quickly?

Generally, yes – unsecured are more of a short to medium term option than secured loans. They often have loan terms of one to three years, although this can vary from lender to lender.

If I offered a deposit and then needed the money back, is that possible?

No – you can’t get a lender to pay back your deposit because you changed your mind. However, there’s nothing to stop you from refinancing and transferring to a different unsecured loan where you don’t offer that deposit. It can cost a bit in fees to refinance and you might be paying higher rates without the deposit to sweeten the deal for the lender, however.

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