Cheap Business Loans

Compare business loan offers with Savvy to help you secure the cheapest and best deal for your company.

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, updated on July 26th, 2023       

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How do I keep the overall cost of a business loan relatively cheap?

If you’re looking at the overall, final cost of business loans and hoping to keep the figure as cheap as possible, a number of things need to be working in your favour. To start with, you need to make sure you’re picking the right loan from the right lender.

The type of loan is the first thing to consider, as this can have a big impact on the overall cost of a business loan. Having an asset to offer as security can be key, as secured business loans almost always have considerably lower rates than the alternatives.

Rates and fees can make a big difference in the overall cost of a loan, and these vary significantly from lender to lender. The rates also change quite frequently, so it’s important to get up to date information on what lenders are offering. One of the best ways you can do this is through an online comparison website like Savvy – allowing you to quickly compare business loans from a variety of Australia’s top lenders, and find the best option for your business in minutes.

In all things loan related, credit ratings – both yours and your business’ – can make quite a difference, and an exceptional credit rating can open the door to very affordable rates. It’s always worth looking after your credit as best you can.

Lastly, it’s worth remembering that a short loan will means a lower overall cost, as the loan has less time to accrue interest. So keeping the loan term as short as possible and considering early repayments can be a very good way to keep the overall cost of a business loan cheap.

How can I get a business loan with cheap repayments, to make servicing the loan more affordable?

If you’re looking to keep the ongoing monthly costs of paying off a business loan low to make it more affordable to maintain (rather than lowering the final combined cost of the loan), then the strategy is a little different.

In this case you’ll actually want to be opting for the longest loan term available – meaning the cost is more spread out, and each individual repayment you make on the loan will be less. However, you should remember that although that keeps the cost of maintaining the loan quite cheap, it does make the overall final cost of the loan more expensive – as there’s more time for the interest to accrue.

The other factors that affect overall cost are still very helpful in this scenario – so finding the best rate and maintaining good credit are still going to be very helpful keeping things cheap. And a secured loan is even more beneficial in these circumstances as they often have options for much longer loan terms.

And before you commit to a loan, it’s at least worth considering if invoice finance would be helpful for your circumstances. Invoice finance is an alternative type of loan where your business transfers a number of your outstanding invoices (the money other businesses owe to you) over to the lender, who then pays you the majority of the owed amount, and then recovers the invoice debts from your customers themselves. You don’t actually need to make any repayments, because you’ve already paid – with the goods or services shown on the invoice. It's not available to everyone, but if your business is eligible, it can be an excellent option.

What factors about my business will affect how cheap my loan interest rates are?

There’s a number of factors about your business that can influence the interest rates you get offered on a loan. With each of these on your side, you stand a better chance of getting approved for some of the cheapest business loans in Australia.

  • Your trading history and current cash flow – The amount of trade your business is doing, and the cash flow coming through your bank accounts is obviously going to have a significant impact on your ability to service a loan. Better cash flow makes you a safer bet for a lender, which translates into better rates.
  • How long you've been in business – Lenders like to trade with businesses that are well established with a track record of solid trade, so if your business has been running successfully for a decade or two it may attract better rates from a lender.
  • The size of your customer base – a strong customer base is a key factor in how stable a business is. And in general, a large number of customers is better than a business that depends on a few key clients.
  • The growth of your industry – An industry that’s seeing strong growth at the moment will probably get a better deal with a lender than one that’s in decline (and therefore more of a risk). If you’re one of Australia’s few remaining DVD rental businesses, you probably shouldn’t expect great rates on a business loan.
  • Your public profile – A business that’s in the public eye will generally be more well regarded by a lender. This could mean your business being in a prominent public location, but having half a million followers on social media also won’t hurt.

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Frequently asked questions about cheap business loans

What can a business loan be used for?

As long as they’re put towards your business, you can make use of your loan just about any way you wish. Whether you need a loan for your restaurant, to help boost your business’ cashflow, run a new marketing campaign or even invest in your medical practice, you can reach your business’ financial goals with commercial finance.

Will specialised options like low doc loans and bad credit loans affect how cheap my business loan is?

Yes, they will. Bad credit and low doc loans deal with situations which carry slightly more risk for a lender – statistically there's a bit more chance that something could go wrong with the loan. Lenders offset this risk by charging a little extra on the fees. Which means that bad credit and low doc loans always cost a little bit more than conventional business loans.

What's a comparison rate and how does it help me find better rates?

A comparison rate is a figure that gives the best estimate possible of the overall cost of a loan by including both the interest rate and the main fees charged by the lender. If two lenders have the same interest rate, but one has a higher comparison rate, it means one charges higher fees. The comparison rate doesn’t include every fee of course. Just the main ones, like setup and account keeping fees.

Could I get cheaper rates on a business loan with a guarantor?

Yes, a guarantor will very likely improve the terms you get on a loan. You’ll need someone in a strong financial position who’s willing to vouch for your business (and potentially pick up the bill in the worst-case scenario that you can’t make your repayments). It improves lender confidence, and that means better loan terms. But it’s a big responsibility for the person acting as guarantor.

If I make early repayments on my business loan, will it make it cheaper overall?

Generally, it will. You need to be careful though, as some lenders charge substantial fees for early repayments, which might make it less worthwhile. This is worth checking before you apply for the loan, especially if you want early repayments to be an option.

If I find a cheaper option for a business loan, can I switch?

Normally yes. Refinancing a business loan is pretty common. But again – check to see if your lender has fees that make this process more expensive.

Are there any interest-free loans available to small businesses?

Not really – there aren’t any readily available interest-free loans available to small businesses. However, if you’re eligible to receive a government grant, this is the next best thing. Some of these include New Business Assistance with NEIS, Accelerating Commercialisation and the CSIRO Kick-Start program. Grants come without any interest or requirement to repay money invested in your business, essentially serving as free money. However, eligibility criteria for many of these programs may be stricter than those on loans, so always check to see whether you can qualify.

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