Many business owners will need to raise finance in their lifetime. One common way of doing this is by taking out a loan – but which one? In this article, we’ll explore all the different types of business loans in Australia.
What is a business loan?
A business loan is an amount of money you can borrow from a lender, such as a bank. This is to help start or effectively run your business. Like all other loans, a business loan comes with interest and you will need to repay the money in specified amount of time.
Do your research
However, before you apply, you must do your research. Make sure that you understand your finances and choose your business loan carefully. Each type will have different tax and GST implications. To make sure you understand the terms of your loan, it’s worth consulting with a business adviser or accountant.
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Types of business loans
There are several types of business loans. These aim to support different kinds of business structures and account for the different circumstances businesses may be in. These include:
Equipment financing
This is a form of funding equipment. Hence, this loan aims to protect the amount of money against the equipment itself. Thus, the interest rates are lower as compare to other loans. For you to be successful in receiving this, you need to make sure you nail two things. In most cases you can only borrow up to $30,000 for this loan.
Property assets
This is very beneficial for businesses that work in the commercial and corporate field. This can cover up to 80 percent of the total value of the property. Whether or not the property will be able to generate a rental income from tenants is the main consideration of lenders.
Personal loans
This is the most common type of loan. Usually most lenders are happy to provide this loan. However, you need to make sure you display a good credit history. This not only caters for businesses but also things such as holidays or a car. This type of loan is typically borrowed for a house but can also be used for other purposes.
No interest micro-business loan
The No Interest Micro Business Loan provides low income earners with interest-free loans to support their new or growing business. If your business runs in Tasmania then you will be eligible for this loan. Like other loans, this one has its own requirements. To be successful, you need to prove that you own a personal assets such as car.
Peer to peer lending
Peer to peer lending involves individuals lending money to other individuals. This is also known as marketplace lending, as people match with each other through a website and lend money or actual products. There are generally 3 parties involved in the process. The difference in peer to peer lending is that there is no bank or credit union which is providing the money, instead it is individual investors. The idea behind this is to operate outside of the banking industry in order to get access to lower interest rates.
Conclusion
Overall, you should consult someone who has no vested interest in the other party to go through the terms of the contract, rather than simply rely on a bank representative. All loans provide some form financial assistance to kickstart your business. If you are struggling with money and need assistance, it is best to get advice first. Getting special advice clears any doubts and will give you a better understanding of how to apply for an appropriate loan.
