Before you meet with a mortgage broker, it is important to understand Australia’s common types of business loans. So, when it comes to applying, you can rest assured knowing you have considered all the financial options available.
Line of Credit: is an on-demand type of business loan that offers funding by allowing the company to draw on an account
balance up to a predetermined amount. These loans are very adaptable and are often used to cover unexpected cash flow gaps
or finance smaller capital needs. Often paid back quickly, the interest rate on a line of credit is likely to be lower than on an
overdraft. However, failure to make payments will result in repossession of the protected asset.
Business Term Loan: is a lump sum loan to cover larger, one-off expenses. A business term loan or business fixed-rate loan is
funding aimed at financing long-term strategic acquisitions that increase the company’s earning capacities, such as new
equipment, real estate or working capital. A business term loan is typically arranged over a fixed period with regular
repayments and backed by a mortgage on a residential or commercial property or another appropriate asset.
Business Overdraft: allows the account holder to continue withdrawing money after the account has no funds. A business
overdraft is a roll-over loan that connects your business account with a pre-approved overdraft limit to use for business
expenses. The overdraft facility provides working capital for your business before you receive income.
Commercial Bill or Bill of Exchange: is an unsecured business loan, for short-term financing needs, such as inventory. You
can get a lump sum advance with monthly interest payments, with the remaining balance is due at the end of the year.
Development Finance: is a loan used exclusively for comprehensive renovations or new building projects of a business site
and/or land, which will profit the business eventually. In most cases, this relates to apartment buildings and commercial
Fully Drawn Cash Advance: is similar to a business term loan which provides immediate access to funds for long-term
investments. For example, the funding can be used for business start-up costs or equipment to increase its capability. A
completely drawn advance allows a fixed interest rate for a set amount of time.
Factoring: also known as debtors finance and accounts receivable finance, is the process by which a factoring firm purchases
your businesses outstanding invoices at a discount. The loans are then pursued by the factoring firm. This is a fast way to
obtain cash. However, it can be more costly than conventional forms of financing.