Navigating Business Loans Made Easy

Most Common Business Loan Questions Answered

Are you a Small Business Owner trying to find out more about Business Loans? Not sure whether you need a Business or a Personal Loan?

Small businesses are the backbone of Australian economy. 2020 has not been very kind to the health of small businesses around the country. 2020 has been challenging to say the least. Starting with floods, then bushfires and then Covid-19, all taking a toll on the economy.

However, it’s not all bad news. With interest rates at its lowest and the Australian economy clawing its way back with a boost in retail spending, there is a lot to be optimistic about.

If you are a business owner, this is a great sign of recovery and one of the ways you can stay ahead of the game is by ensuring your business is set-up to capitalise on this positive trend. Getting a Business Loan is one way of doing it, but do you know the basics? Here’s our pick of a few commonly asked questions.

 

What is a Business Loan?

As the name suggests, a Business Loan is for starting-up, growing, operating or expanding a business. There are several different types of business loans available depending on the stage and needs of your business. Three most common types of Business Loans are:

Business Asset Loan/Equipment Loan

Usually, a secured loan where the asset/equipment you purchase is used as a security. A Business Asset Loan helps you purchase or upgrade any asset or equipment you need to accelerate business growth.

Cash Flow Loan

A short-term, unsecured loan designed to meet working capital needs for day-to-day operations. Cash Flow Loans usually come with higher interest rates as they tend to be unsecured.

Line of Credit

A Business Line of Credit is like having a business credit card. Business gets approved for a set-limit, but interest is only charged on the amount that is drawn/used.

Business Or Personal Loan. What's the Difference?

Are Business Loan Repayments Tax Deductible?

The simplest answer is, Yes, but partially. While a Business Loan repayment as a whole is not tax deductible, the interest part of the repayment is.

 

How do Business Loans work?

Answer to this question really depends on the type of Business Loan. However, it is not very different to any standard loan. A Business Loan can be secured or unsecured. Interest is charged at an annual rate but might be calculated daily. A Business Loan will also have the usual daily, monthly, annual fees such as establishment fees, administration and management fees.

 

Will a Business Loan affect my ability to get a mortgage?

Like all liabilities, a Business Loan will affect your credit history. Since most mortgage lenders assess your application on having a stable income, it is important that your business is in a healthy financial state to ensure it does not affect your ability to get a mortgage.

 

Business Loan vs Personal Loan. What’s the difference?

A Personal Loan is borrowed for personal use, to be spent on anything. People usually take-out Personal Loans in emergencies, to cover unexpected/unbudgeted costs or to purchase/upgrade or update something they want. Personal Loans can be secured or unsecured and are usually taken out over a set time. Personal Loans are based on your personal credit score. So, if anything goes wrong, your credit score will be affected.

A Business Loan is specifically intended to be used for business purposes only. The amount borrowed are usually higher and the application process can be a lot more intensive with lenders often asking for a business plan and historic Profit & Loss statements. Business Loans are a great way to build a business’s credit score based on their performance.

 

Can I use a Business Loan for personal use?

Technically, yes, especially if you are a sole trader. If you are a one-man-band, you do not even need a business account to get a Business Loan and can use the money as you deem fit.

 

Where can I get a Business Loan?

You can get a Business Loan from any bank or a financial institute. At Cash.com.au, our team of expert brokers spend time to understand your business needs and goals and give you access to competitive rates from nation’s leading lenders. With over two decades of experience, our team will help you navigate through the application process and get you the loan that suits your individual business needs.

Apply Now to get the process started.