Whether you are managing cash flow, buying stock or expanding, the right business finance can help you grow without draining your working capital. The wrong product can tie you up with high costs. Here is how the main options compare.

Secured business loans

Secured loans use an asset, usually residential or commercial property, as security. Because the lender's risk is lower, rates are lower and terms longer, often up to 15 to 30 years when secured by property. They suit larger amounts, such as buying a business or premises.

Unsecured business loans

Unsecured loans do not require property as security, although lenders usually ask for a personal guarantee from the directors. Approval can be fast, sometimes within days, but rates are significantly higher and terms shorter, usually one to five years. They suit short-term needs where speed matters.

Business overdrafts and lines of credit

An overdraft or line of credit lets you draw funds up to a limit and repay as cash comes in. You pay interest only on what you use. These are useful for smoothing seasonal cash flow or covering gaps between paying suppliers and getting paid by customers.

Invoice finance

If your customers take 30 to 90 days to pay, invoice finance lets you borrow against your unpaid invoices. You receive most of the invoice value upfront, and the rest, minus fees, when the customer pays. It grows with your sales.

Equipment and vehicle finance

Buying machinery, technology or vehicles? Equipment finance uses the asset itself as security and is often cheaper than an unsecured loan. Read our guide to equipment finance.

Commercial property loans

If you want to buy your premises or invest in commercial property, see our guide to commercial property loans.

What lenders want to see

• Your ABN and how long you have been trading (many lenders want at least 12 to 24 months)
• Recent business bank statements
• Financial statements and tax returns, or BAS for low-doc options
• Your business and personal credit history
• What the funds are for and how the loan will be repaid
• Security, if it is a secured loan

Low-doc options

If your tax returns are not up to date, some lenders offer low-doc business loans based on BAS statements, bank statements or an accountant's declaration. Rates are higher, but they can help newer or fast-growing businesses.

How to choose

1. Match the loan term to what you are funding. Do not fund short-term needs with long-term debt, or vice versa.
2. Compare the total cost, including establishment fees, ongoing fees and early repayment charges.
3. Think about flexibility, such as redraw or extra repayments.
4. Consider the security and guarantees you are giving.

Get the right structure

Business lending covers a wide range of products and lenders, from major banks to specialist and fintech lenders. We compare them for you. Explore business finance with Propple or book a free call.

This article is general information only and does not take into account your objectives, financial situation or needs. Government schemes, tax rules and lender policies change, so check current details before acting. Propple Pty Ltd is an Australian Credit Representative (537767) of AFSL 384704.