Business Loans

We will not quote you a rate on a web page, because rates move and every business is priced on its own file. What we can do is show you how to compare two offers honestly, which is where most owners get caught.

• Some short-term lenders quote a factor rate rather than an interest rate. A factor is a flat multiple applied to the amount advanced. It is not annualised, so it looks smaller than it is, especially over a short term.
• Ask for the total amount repayable. One number, including every fee. Then compare that against the total repayable on the alternative.
• Ask whether the interest is charged on the reducing balance or on the original amount. On a flat-charged loan, paying it out early may save you nothing.
• Ask what the early repayment cost is. If you plan to refinance into a secured facility in six months, an exit fee changes the maths.
• Add the establishment fee to the total. A percentage-based establishment fee on a large facility is real money.

Factor rate

A flat multiple applied to the amount advanced rather than an annual interest rate. Because it is never annualised, a factor always looks smaller than the equivalent rate, especially over a short term.

Flat or reducing

Flat interest is charged on the original amount for the whole term. Reducing balance charges only on what you still owe. On a flat-charged loan, paying out early can save far less than you expect.

Establishment fee

A one-off charge for putting the facility in place, often expressed as a percentage of the limit. It belongs in the comparison, not in a footnote.

Total amount repayable

Every dollar that leaves your account across the life of the loan, fees included. It is the only figure that compares two offers honestly.

Here is the honest number. Not the headline one.

1. 01Trading history. Most business lenders want to see the entity trading and registered for GST for a meaningful period, with revenue that is consistent rather than one large receipt.
2. 02Bank statement conduct. Twelve months, read line by line. Dishonoured payments, a bank balance that sits at zero, existing short-term lender debits and gambling transactions are all visible and all count.
3. 03The ATO position. Lodgements up to date, arrears disclosed, and any payment plan being met. This is checked, not assumed.
4. 04Credit file. Both the company file and the directors’ files. Recent enquiries matter as much as defaults, because a run of enquiries reads as a business shopping in distress.
5. 05Serviceability. Adjusted earnings tested against the new repayment plus every existing commitment, at an assessment rate above the actual rate.
6. 06Security and exit. What the lender holds, and how the loan ends.

The order matters. A business can service the loan comfortably on paper and still be declined at step two, because conduct is what a credit officer trusts when the financials are a year old.

The term should match the life of whatever the money is buying. Borrowing over three years to fund something that pays back over ten starves the business. Borrowing over ten years to fund something consumed in one season means you are still paying for last year’s stock in 2033.

1. 01

   Define the purpose in one sentence

   If the purpose cannot be stated in a sentence with a number in it, the file is not ready. Lenders fund specific things.

2. 02

   Pull the position together

   Bank statements, financials, interim accounts, ATO portal print, and a schedule of every existing facility including the ones that do not appear in the financials.

3. 03

   Decide secured or unsecured before approaching anyone

   If there is usable property equity, we model both. Often the secured option is slower by three weeks and cheaper by an order of magnitude, and knowing that changes the decision.

4. 04

   Write the credit submission

   The story, the numbers, the security, the exit. Anything odd in the statements gets explained by us before a credit officer has to ask.

5. 05

   Approach two or three lenders with genuine appetite

   Not the whole panel. Every enquiry marks the credit file, and a scattered approach damages the next application.

6. 06

   Settle, then diarise the review

   Expiry dates, review dates and interest-only end dates go in the calendar on the day of settlement, not the month they fall due.

We turn work away when the product does not fit, because a facility that fails in six months is worse for you than a no today.

• The gap is a timing gap. If your debtors pay at sixty days and your problem is the sixty days, invoice finance or an overdraft fits and a term loan does not.
• The business is not profitable at the current volume. New debt does not fix a margin problem, it accelerates it. That conversation belongs with your accountant first.
• You are already carrying three or four short-term facilities. Adding a fifth is not consolidation. Refinancing the lot into one secured facility might be.
• Solvency is genuinely in question. That is a matter for a registered insolvency practitioner, and borrowing in that window can make things worse rather than better.