• Skip to main content
  • Skip to footer

Abbotts

  • Home
  • About Us
    • Abbotts History
    • Our People
      • Directors
        • Andre Parker
        • Bez Esquivel
        • Bradley Abbott
        • Briony Knott
        • Christopher Higham
        • David Drake
        • Eric Ballard
      • Associates
        • Melissa Hansen
        • Stephen Hollyock
      • Client Managers
        • David Chang
        • Elliot Moses
        • Gabrielle Zonato
        • Vishen Bisnath
      • Finance Brokers
        • Bez Esquivel
      • Financial Advisers
        • Andre Parker
        • Amanda Kirkpatrick
        • Briony Knott
        • Fiona Chua
        • John Donald
        • Michelle Baker
      • Accountants/Bookkeepers
        • Angeline Camaya
        • Lewis Grant
        • Debbie Byrnes
      • Administration
        • Anne Abbott
        • Jaymee Sunder
        • Kevin Thomson
    • Careers
    • Our Philosophy
    • Social Responsibility
    • Testimonials
    • Our Clients
  • Services
    • Taxation Services
      • Taxation Compliance
      • Strategic Planning
      • Capital Gains Tax (CGT)
      • Fringe Benefits Tax (FBT)
      • Goods & Services Tax (GST)
      • Business Structures
      • Research and Development
      • Foreign Taxes
      • Tax Deductions
      • Tax Audit
    • Business Services
      • Commence a Business
      • Run a Business
      • Succession Planning
      • Advisory Services
      • Systems Integration and Support
      • Corporate Secretarial
      • HR and Payroll
    • Finance Broking
      • Loan and Borrowings
      • Venture Funding
      • Debt Management
    • Wealth Management
      • Establish Your Wealth
      • Execute Your Strategy
      • Maintain Your Strategy
      • Strategies and Structures
    • Superannuation
    • Bookkeeping
      • MYOB Bookkeeping
      • MYOB Setup and Training
      • Xero Bookkeeping
      • Systems Integration and Support
      • HR and Payroll
  • Industries
    • Farming and Agribusiness
    • Supermarkets
    • Medical
    • Construction
    • Pharmacy
  • Insights & News
  • Client Portal
    • Make a Payment
    • myprosperity
    • MYOB Document Portal
    • Resources
  • COVID-19 Hub
  • Contact Us
You are here: Home / Advisory & Business Services / A simple guide to small business loans

A simple guide to small business loans

December 19, 2018 By Eunice Lau

Small business loans can be great when you need to get your brand up and running or cover unexpected expenses. However, it’s useful to understand the difference between the available options before committing to one.

To help you make the right choice, here’s what you need to know about some of the more commonly used business loans.

Line of credit/overdraft

A line of credit involves overdrawing on your business’s bank account up to an amount approved by your financial institution. This is commonly used for short-term capital, or as a source of cash flow to keep operations running smoothly.

Pros:

  • Flexible – use funds as needed and repay at your own pace.
  • Allows you to establish a good credit history for future borrowing.
  • Simpler application process than other loan types.

Cons:

  • The bigger the overdraft, the bigger the fees.
  • May incur fees even when not being used.

Bank term loan (secured or unsecured)

A bank term loan is a medium-to-long-term loan option commonly used for purchasing equipment or covering business start-up costs. It involves borrowing form a lender and making regular repayments over an agreed period.

Pros:

  • Flexible – choose from fixed, variable, split rate or interest-only loans.
  • Allows you to borrow a larger sum over a longer term, with lower interest rates.
  • May be able to match the loan term to the life span of the underlying asset.

Cons:

  • May be subject to borrowing minimums.
  • Attracts set-up and service fees.
  • Variable rates can fluctuate, resulting in higher repayments.

Mortgage loan

A mortgage loan can be used to cover most of the upfront costs of purchasing a property for your business. The property is then used as collateral by your lender until you’re able to repay the loan amount and the incurred interest.

Pros:

  • Flexible – choose from fixed, variable, split rate or interest-only loans.
  • May offer features such as redraw facilities and no-penalty early repayment.
  • May be easier to obtain than a bank term loan.

Cons:

  • May be subject to borrowing minimums.
  • Attracts set-up and service fees.
  • Variable rates can fluctuate, resulting in higher repayments.

Lease financing

Used primarily for equipment and vehicle purchases, lease financing means the lender owns the asset and charges the business a hire fee. At the end of the lease agreement, the business may be able to refinance or purchase the asset.

Pros:

  • Allows you to maximise the use of your working capital.
  • May entitle you to certain tax deductions.

Cons:

  • May be more expensive than other types of financing over the long run.
  • May be subject to hefty early termination fees.

Looking for the right business loan?

Understanding how the different commercial loans vary can help you choose one that best suits your business needs. Make sure you speak with our professional mortgage broker, Bez, before making any decisions to ensure your business gets the right level of financial support.

To get in contact with Bez, please call us on (08) 9321 2642.

Filed Under: Advisory & Business Services

Eunice Lau

Footer

Connect with Abbotts Group

+61 8 9321 2642

+61 8 9322 1385

recep@abbotts.net.au

PO Box 414, West Perth WA 6872

813 Wellington Street, West Perth WA 6005

Abbotts

Disclaimer | Terms of Use | Privacy
Liability limited by a scheme approved under Professional Standards Legislation.
Abbotts Wealth Management Pty Ltd (AFSL 303138)
Abbotts Finance Brokers Pty Ltd (ACL 467436)

Our Services

Taxation Services
Business Services
Finance Broking
Wealth Management
Superannuation
Bookkeeping

Copyright © 2022 · Gallery Pro on Genesis Framework · WordPress · Log in