The beginner’s guide to small-business loans

Whether you’re considering a small-business loan or simply want to find out everything there is to know about business financing, our comprehensive guide will reveal all.

What are small-business loans?

A business loan is similar in nature to a personal loan. However, the acquired funds must be used purely for business purposes. As with other types of loans, a business loan involves borrowing an amount of money, before having to repay the loan with added interest. This total repayment amount is broken down into smaller repayments which are usually due on a weekly or monthly basis.

The different types of small-business loans

There are many different types of business loans, all designed to cater towards your venture’s specific financial needs. The most common small-business loans are listed below.

  • secured business loans
  • unsecured business loans
  • short-term business loans
  • Long-term business loans
  • business credit cards
  • invoice financing
  • equipment financing
  • business microloans
  • merchant cash advances
  • business lines of credit
  • business overdrafts.

What can small-business loans be used for?

There are a number of business-related expenses that a business loan can be used for. Many of these include:

  • purchasing equipment
  • maintaining inventory
  • managing daily expenses
  • paying employee wages
  • moving to another business location
  • product development
  • marketing and promotions.

Key questions to ask yourself before you apply for a small-business loan

As with any exercise concerning your business, applying for a loan shouldn’t be a snap decision. Here are some important questions you should ask yourself before you begin your loan application process:

  • How much money does my business need to borrow?
  • What will the money be used for? How will it help my business in particular?
  • What will my monthly repayments be? Can I afford these?
  • Do I want a short-term or long-term loan?
  • Do I need to put up collateral for the loan? If so, what asset should I use?
  • Is my credit score good enough to obtain a loan?
  • Do I want to seek funding from an alternative or traditional lender?

What do I need to apply for a small-business loan?

The business loan application process will largely depend on whether you seek financing through a traditional or alternative lender. Some lenders require the following to process your application:

  • driver’s licence
  • credentials for your online business bank account.

How to apply for a small-business loan

If you own an Australian-registered business, have been in operation for 6 months or more, and have a minimum annual turnover of $50,000, then you can apply for a small-business loan online in as little as a few minutes.

  1. Simply fill in our application form
  2. Receive a lending decision within 24 hours
  3. Obtain your funds in your nominated business bank account the following business day.

It’s that simple!

There you have it – our beginner’s guide to small-business loans, including what they are, how they can assist your SME, and so much more. We hope this guide has given you all of the information you need to pursue the right small-business finance for your venture.

 Yanir Yakutiel, CEO and Founder, Lumi 

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