Starting a business requires some initial funding at least. You can try to be frugal and start with a small and tight budget. However, most industries will need at least a few thousand dollars to provide the initial product stock, office supplies, technology and salaries needed to build the business infrastructure. Thus, here are the main points you should examine when choosing a business loan type in Australia.
One: The Type Of Loan
There are actually several different types of loans each with different advantages and disadvantages that you can avail for your business needs. For instance, a credit line will give you an amount of credit for recurring needs, such as buying inventory or on employee wages, but they should not be used to buy new equipment and supplies. Instalment loans are generally repaid in equal monthly instalments covering both the principal and interest and balloon loans are interest-only loans, with the principal due back on the final day of the term of the loan.
Two: The Lending Institution
You will also want to look into the lending institutions you plan to negotiate with. If you already have a business check account or other credit forms with a particular financial institution, it may be convenient and hassle-free to apply for a loan with the same organization. And because they are your long term partners, they may also be able to provide you with better terms. If it is impossible for so, consider looking for a lender that seems to be easy to work with, or one that is particularly open to business platforms like yours.
Three: Conditions For Paying The Loan Back
The loan may also come with specific conditions on how to repay your loan and what happens if it is not paid back on the said date and time. To begin with, loans will either be “secured,” with a piece of equipment or another asset of value to use as surety, or “unsecured,” where no surety is required.
The moneylender has the right to take hold of the secured asset if the borrower fails to pay back a secured loan on time. If one fails to repay an unsecured loan, you may be held personally liable for the remaining balance, depending on what was stipulated in the terms and conditions. So, the best choice is to get an unsecured business loan in Australia.
Four: The Interest Rate
You’re also going to want to consider the interest rate, of course. No matter what kind of loan you get, you’re going to pay some kind of interest rate, but that interest rate is variable based on a number of factors. The lower the lender’s interest rate, the better. But you may have special circumstances that allow you to exchange a higher interest rate for another benefit such as a larger amount of loan capital.
Five: The Terms
You’re also going to want to check out the loan terms or basically, the length of the loan and its collateral. If you only need a temporary capital boost, short term loans are more favourable. You will also want to examine how (monthly, quarterly or annually) the interest rate is computed and compounded.