Need a Mortgage Broker for Business Lending?
Businesses are costly to start and manage, particularly when beginning or expanding a business a significant sum of money is required to cover these costs. As a solution, businesses can take out a business loan to pay for their needs, but this must be repaid with interest.
A business loan should be used to cover costs that the company is unable to cover on its own at the moment, such as purchasing a storefront or office, paying for staff wages, launching advertising campaigns and investments in new company machinery or IT tech.
Please call First Choice Mortgage Brokers to discuss your business lending opportunities and for any assistance in accessing the business lending application process. Our commercial insurance brokers can assist you with professional and courteous brokerage services wherever your company is based in Australia. As one of the most reputable financial advisers in Sydney, our knowledgeable brokers can supply you with numerous quotes on appropriate commercial policies to address the risks you encounter.
Types of Business Loans
Line of Credit
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
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
A 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; the remaining balance is due at the end of the year.
Development Finance
Development Finance is a loan used exclusively for comprehensive renovations or major 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 premises.
Fully Drawn Cash Advance
A 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
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.
Choosing Between Secured and Unsecured Business Finance
No matter what type of business loan you and your mortgage broker decide to choose, it is crucial to know the difference between secured and unsecured business financing.
Simply put, a secured loan is when an individual pledges a form of personal asset to the creditor, as a backup payment if they cannot make their scheduled loan repayments. In this situation, the lender will sell your promised asset to make up for the repayments. A secured loan’s collateral may include land, machinery, facilities, or vehicles, depending on the type of loan.
On the other hand, an unsecured loan does not have a pledged asset as a backup for loan repayments. If you haven’t pledged specific collateral as protection on your loan, your savings can be used to repay the outstanding debt if you can’t afford payments.
Depending on which financial option you choose will heavily influence your loan’s interest rates. As the risk on an unsecured business loan is greater, so interest rates will be higher. Whereas a secured business loan has a lower risk for the lender, equalling in lower interest rates. For example, personal loan and credit card interest rates are usually 4-10% higher than a mortgage or home loan interest rate. If you can consolidate your debt under your mortgage, you will be paying substantially less interest.
Aside from the distinction between secured and unsecured business loans, interest rates vary between all forms of business loans. This is why it’s best to speak with the professional mortgage brokers at First Choice, and we will make sure you are getting the best value for your money.
Specialised Securities
Not all lenders will look at the security you are offering for a loan in the same way. Different lenders can have different opinions on the loan-to-value ratios of assets, which refers to the loan amount expressed as a percentage of the property’s value. A lender can refuse any asset they don’t consider valuable. When you think about it, refusing inexpensive assets makes sense…
If you have trouble paying your repayments and need to sell a security asset to repay it, the lender wants to know that the security asset can be easily sold. The bank would also want to know that the asset’s value is unlikely to fluctuate and lowers its risk level.
However, what could seem to be a sensible pledge to a lender is not always the answer you were looking for! Here’s where we come in. Our committed team of mortgage brokers are well-versed in a wide range of specialised securities. We already have partnerships with different lenders and can therefore source the best loan offer based on your needs.
The most popular types of specialised securities includes:
- Company title property
- Multiple units on one title
- Studio apartments
- Vacant land
- Holiday rental property, e.g., hotels, motels, etc.
- Retirement units
- Flood-affected property
Business Lending FAQs
What is Business Lending?
Business lending is where a business borrows a sum of money from a lender specifically intended for business purposes. Alike all loans, in exchange for the business funding, interest is charged on top of the loan amount. Typically, business lending is paid back over an agreed amount of time, with regular repayments.
Business lending offers interest rates in a somewhat different manner to other forms of loans, as the risk margin is charged depending on how the lender perceives the business’s chances of success. As well, there are additional fees associated with business loans in addition to interest charges. Learn more about the fees associated with business lending with the First Choice Mortgage Brokers.
First Choice Mortgage Brokers consult small, medium and large business one-on-one about business finances, with our client’s interests always at the centre. Business lending can differ a lot between suppliers – in terms of amount, terms, interest rates, fees and security – so it is best to closely review all financial products with a mortgage broker before applying.
Take the guesswork out of your business lending process with First Choice Mortgage Brokers! We will compare multiple business loans currently available on the Australian market to find the best loan for your unique situation.
What’s the Difference Between Business Loans and Business Overdrafts?
A business overdraft is a line of credit loan that becomes available to a company when the business withdraws money that exceeds the balance of its bank accounts. The bank then extends the maximum overdraft limit, allowing the business to borrow the bank’s money, with interest charged on the fluctuating daily balance. While the overdraft balance must be returned, there is no time limit on doing so.
First Choice Mortgage Brokers understand that different business owners have different expectations and desires when it comes to obtaining a loan or credit for their company. Which is why we work one-on-one with our clients to get them the best loan for their circumstances. This includes researching both business loans and business overdrafts as potential options.
This effectively means that a company can afford to make deposits even though the account is empty, allowing the business to have a high degree of cash-flow stability. This is helpful for paying staff or bills on schedule, even though your clients have not yet paid you.
Any money borrowed on a business overdraft – like a business loan – must be repaid, and interest is owed on the overdraft depending on how much credit you’ve used over a certain span.
How Do I Qualify for Business Lending?
When you apply for business lending, the lender will use a variety of considerations to decide if you qualify for the business lending application or not. In general, there are six important characteristics lenders consider when evaluating your businesses’ eligibility for a business loan.
These same factors will be used to determine your loan’s terms and costs if you are approved. First Choice Mortgage Brokers can assist with your application progress to give you the best chance to be qualified for a business loan.
Personal Credit: Lenders will nearly always be concerned in your company credit, but also to your personal credit as the two are inextricably tied. It is fair to say they’ll want to look at your personal financial wellbeing as well, including your current credit card balance, credit history, billing history, and amounts owed.
Proof of Individual Income: Since your personal and business accounts are intertwined, your personal income will foster the lender’s attention. If your financial situation is in good shape, expect lenders to see you as a lower risk and be more willing to partner with you.
Certification: Your business must have a valid ABN to receive a business loan.
Business Debt Coverage: Having debt in your company isn’t an issue. The dilemma is whether or not your company will be able to meet its debt obligations. An investor evaluates your cash balance and interest payments to get a sense of your corporate debt coverage.
Business Details: Your loan is more likely to qualify if the business has existed for more than 12 months, has a healthy level of revenue, and operates within a lower-risk industry where financial less is less possible. Lenders are more cautious when the business is within high-risk sectors like property, mines, and manufacturing.
Guarantor Contribution: Even if you can prove your company’s profitability, certain lenders may require a loan guarantor. A guarantor is an external party who, if you can’t afford your repayments, will reimburse the loan you have borrowed. No matter if a guarantor is a requirement or not, having one will give your application a better chance of being approved, as essentially, a guarantor ensures a loan will be repaid.
How Does a Mortgage Broker Help with Business Lending?
First Choice Mortgage Brokers have the expertise and skills to help you grow your company and advise you on the best financial options for your objectives, as well as help fund your business equipment and vehicles.
The most significant benefit of using a First Choice Mortgage Broker for your business lending needs is that an experienced mortgage broker will compare multiple options to find you the best business loan. Your mortgage broker at First Choice will take the next step and apply for your loan as well as any other financing paperwork from equipment loans to investment loans, making the whole process a lot simpler for you.
With so many banks providing various finance applications, arrangements, and repayment plans, it can be challenging to choose the right one for your business. It is wise to get impartial counsel before making a decision, and this is where First Choice Mortgage Brokers can assist.
It is important to note that when you sign a business loan directly with a bank, you only have access to that particular bank’s products and services. Dealing directly with a bank will limit your options.
Instead, First Choice Mortgage Brokers have access to a panel of lenders that sell hundreds of different items. Better still, your mortgage broker will help you sort through the different solutions to find an agreement tailored to your specific financial position and help you apply appropriately.
Speak to a Mortgage Broker
You can make an appointment with a First Choice Mortgage Broker consultants by calling 1800 111 455.