Kelly O’Dywer MP, the Federal Minister for Small Business has reported that 97% of businesses in Australia are classified as small businesses. This shows that it is the entrepreneurs in Australia, the ones that have a commitment to chasing their dreams who fuel the small yet vibrant business culture of Australia.
It is a known fact that a small business doesn’t mean smaller resources or operating a business without the latest technology and innovative tools. However, when finance is required to
enable your business to remain competitive, business overdrafts and business loans are still a very popular option. Let’s take a look now at the different types of business loans.
Overdraft Vs. Loans
LoanOne rates and researches business loans facilities. We are aware that every business owner has their own set of unique needs and requirements in association to credit needed for the business. LoanOne is focused on offering results that match us to the borrowing profile when it comes to business loans.
Business loans and overdrafts are critical in helping businesses stay afloat, or remain competitive. Business loans can be used for a number of different purposes like upgrading software or equipment, buying a storefront, or even to pay employees when you experience a temporary shortage in cash flow. Following are some common forms of business loans.
1. Residentially Secured Overdraft
This is an overdraft facility which is secured by a home that you reside in. When the overdraft is secured it lowers the risks for the bank. This means they can usually offer you lower interest rates.
2. Commercially Secured Overdraft
This overdraft facility will be secured with real-estate property that the business owns. Once again, the security with your overdraft will lower the risk for your lender, meaning they are able to offer lower interest rates.
3. Residentially Secured Term Loan
This is a loan that is required to be repaid in a set time frame, which is secured with the property that you reside in.
4. Commercially Secured Term Loan
These are loans that need to be paid back within a set time-frame, which are secured by the real-estate property of your business.
Loan Features That All Business Owners Should Be Considering
1. Additional Repayments
When you are able to make additional repayments over the scheduled regular payment, it offers an effective way to pay the loan back faster, along with an added bonus of paying less interest in association to the life-span of the loan. Not all of the lenders will provide this type of facility, and you need to be aware that some lenders charge an early repayment fee, which means it will be pointless to try and pay off the loan sooner if you are forced to pay for this privilege.
2. Redraw Facility
This facility offers business owners with the ability to withdraw additional repayments which were made over and above the required regular payments. This makes the loan-term a little more flexible, meaning you are able to pay more in when you are able to afford it as well as withdraw it out again when needed.
3. Lump Sum Repayments
In some cases when a business is experiencing good cash flow, they might choose to repay a large chunk of the loan, in what is known as a lump-sum repayment. Similar to many small additional repayments, the lump-sum repayment will decrease the loan balance faster and means you will be liable for less interest during the life-span of the loan.
4. Split Loan Facility
The split loan involves dividing a loan into 2 parts. The one part will be charged at variable rates, while the other part of the loan at a fixed-rate. With this option, you are basically taking out 2 loans, with most banks only charging fees for 1 loan. There are a few institutions that charge a set fee when you decide to split the loan.
Loan portability is the feature which provides a way to maintain your loan when changing properties, which saves the hassles involved in refinancing your loan. It basically means that you change the security on the loan.
6. Switching Between Fixed And Variable
The switch facilities offer a way to switch the loan to a fixed rate to a variable rate, or the other way around. This can help you leverage your position should interest rates move up or down.
When it comes to applying for a business loan, and you need the money fast, then LoanOne can help. LoanOne is one of the fastest growing financial companies in Australia. We offer both personal and business loans with competitive rates to different industries. Our loans are fast, flexible and can be tailored to both your personal or business needs.