Why apply for a business loan?
Business loans can allow you to manage your cash flow, purchase stock or inventory and grow your business. Understanding the right option is an important first step, there are a few types of business loans and business finance options available for small business owners.
What type of finance is best for your business?
There is no one-size-sits-all for business loans. The right loan will partially depend on your business goals and your businesses current situation and structure. The two main loan categories are secured and unsecured, outlined below.
Secured loans
A secured loan requires security. This may be property, inventory, accounts receivables or other assets.
- allow you to borrow against your assets, e.g. property, inventory, accounts receivables
- generally involve a longer approval process, as there’s security to consider
- may require value assessments and additional proof and documentation of assets
- commonly offer lower interest rates and higher borrowing amounts than a secured loan.
Unsecured loans
An unsecured loan doesn’t require physical assets (such as property, vehicles or inventory) as security. Instead, your lender will often look at the strength and cash flow of your business as security.
- often use the strength of your cash flow as security, instead of physical assets
- are generally for smaller amount ($250,000 or less)
- may be approved quickly, as less upfront information is required
- are a bigger risk for lenders, as there’s no collateral for security
- tend to have a higher interest rate than secured loans, as they’re deemed higher risk.
Some additional things to consider before applying for a loan
Loan purpose and amount
Make sure you’ve considered your financial position and know how much you need to borrow, but more importantly, how much you’ll be able to repay.
Security
We’ll need to secure your loan using property or some other asset. Make sure you have the details of your security handy when completing the application.
Credit check
We’ll ask for your consent to perform a credit check as part of the online application.
Business loans fees, repayments and interest rates
All business loan will have different repayments, interest rates and fees.
Business loan fees and interest rates
There may be fees for business loans, and will vary depending on the loan and/or finance options you select.
Business loan repayments
Repayments are important to calculate before taking on a loan. Use this loan repayment calculator to estimate what your repayments might be.
Source: NAB
Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/business/loans-and-finance/business-loans/before-applying
National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.
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