Small business owners in Australia have multiple financing options. Before going for any specific type, you should decide whether you want a secured or unsecured business loan. Although this seems like a big decision in itself, you have more choices to opt for. Even after deciding between secured and unsecured, you should select a particular type of loan that meets your business’s needs. Your decision should be dependent on the current financial status of your business. Our today’s topic of discussion will be unsecured loans for your business and what you should consider when opting for this type of business loan funding.
Factors to consider while choosing the best-unsecured business funding for your SME
The Australian finance market offers a variety of loan products to businesses of all sizes. With a little research, you can find a lender with lenient eligibility criteria to fit your present needs. While more options are a plus, it can also create confusion amongst the borrowers. Is there a way to select the most appropriate loan for your business? There is no rigid protocol for this. However, you can consider a few factors to guide your decision. Let us look at some of these below.
What is the amount you need to borrow?
The decision type of unsecured business finance depends on what amount you decide to borrow. Each lender varies in terms of how much they want to lend you. So before you start exploring the markets for a financial product, sit down and determine exactly how much funding you need. How to know how much cash is required? The simplest way is to know where you want to use the borrowed money. Do you want to purchase a new machinery for your business, hire new staff, pay your existing employees, or anything else? Borrow according to the needs of your business.
Rate of interest on the unsecured business loan
Apart from the principal amount, you pay an extra sum of money back to the lender under the terms of the loan agreement. It is the interest component of the loan and this is determined by the interest rate charged by the lender. The interest rate determines how much the loan will cost you. All the lenders differ when it comes to the interest rate.
Unsecured loans have higher interest rates than their counterparts. But the final agreed-upon rate will depend on your business situation and credit score. Applicants with a good credit score and decent repayment history will get lower interest rates and better terms of loans. Regardless of the type of loan either a car loan, property loan, or business finance, you must always compare the interest rates before deciding on one particular lender.
When do you need the funds?
A business owner should know why they want to borrow money. It helps to determine the amount of loan that you need to apply for. After that, decide on when you exactly need a loan. In emergencies, you need a quick injection of cash where the traditional methods fail. Alternative lenders who offer unsecured business finance have a shorter turnaround time.
The applicants can complete their applications in less than 30 minutes. You can get a lending decision within 24 hours of submitting the form. After all the loan terms have been discussed and agreed upon, you will receive the funds in your nominated business account within the next business day. You can take advantage of the quick turnaround time of an unsecured business loan to solve any business funding issue.
What is the schedule of repayment?
Unsecured business loans differ in their repayment schedules. The lender decides the frequency of the repayments. They may also give you the option of weekly, fortnightly, or monthly repayments. You can choose between short and long-term loans depending upon the amount you borrow. Short-term business loans are usually beneficial as you tend to pay a lesser amount in interest. The repayments get deducted from the nominated bank account at the specified payment frequency. Make sure that the repayment schedule is manageable as per your cash flow.
Eligibility criteria of the lender
Whether you apply for an unsecured loans or a business loan, always check the lender’s eligibility criteria. If you know that you will fail to meet particular lender requirements, there is no point in investing time there. It will waste your as well as the lender’s time.
For example, if a lender considers a credit score above 600 as good, there is no point in applying if you fall below this bar. Research the market well to find out lenders that best fit your situation. Thus, apply for a loan after considering all of them. It will make the loan application process both easy and quick.
While applying for unsecured business finance, it is essential to consider these five vital factors, namely the loan amount, rate of interest, turnaround time, schedule of repayment, and the lender’s eligibility criteria. With so many options in the financial market, you need to give some time to research as well. Only you can find a financial product that caters to all your needs.