BUSINESS LOANS

It depends entirely on what you are borrowing for. Unsecured working capital facilities generally require no deposit at all, since they are assessed on trading performance rather than security, and that is reflected in the pricing. Buying an existing business typically requires you to contribute 20 to 50 per cent of the purchase price from your own funds, and lenders look hard at how much of the price is goodwill rather than tangible assets, because goodwill is difficult to recover. Buying commercial premises for the business is a [commercial property loan](/commercial-loans) and usually needs 30 to 35 per cent. If you have equity in a residential property, that equity can often serve in place of a cash deposit and will usually reduce your cost significantly.

We will not frame it that way, because approval is never certain and any broker who promises otherwise is not being straight with you. What we can tell you is what lenders assess, so you can see where your business stands. Unsecured lenders look primarily at trading history, usually wanting at least six to twelve months of trading and a minimum monthly turnover, business bank statements showing consistent deposits, and no unmanaged ATO arrears or recent defaults. Secured lenders look at all of that plus the security itself, and will generally accept a weaker trading picture if the security is strong. Facilities assessed mainly on bank statements rather than full financials are usually the quickest path for a young business, and they are also the most expensive. Send us your last six months of business statements and we will tell you realistically what is available.

Business lending is risk-priced, so pricing varies far more than in home lending and a single published rate would be meaningless. The structural picture is what matters. Unsecured business lending is materially more expensive than property-secured lending, often by a wide margin, because the lender has no security to fall back on and is pricing for that. Establishment fees commonly run from around 1 to 3 per cent of the facility on unsecured lending, and lower on secured facilities. Overdrafts and lines of credit typically carry an annual line fee, often around 1 to 2 per cent of the limit, charged whether or not you draw on it. Where property equity is available, the secured route is usually far cheaper, and we always model both so the cost of speed is visible. All figures are indicative market ranges.

It depends which end of the spectrum you are on. An unsecured facility assessed on bank statements can be approved within 24 to 48 hours and funded within a few business days. A bank overdraft or a facility assessed on full financials usually takes two to four weeks, because the lender wants two years of financials, BAS lodgements and an ATO portal statement, and the assessment is manual. Anything secured by property runs on property timeframes, meaning a valuation, security documentation and typically four to six weeks. Buying a business adds a further layer, since the lender will want the sale contract, the target's financials and often a business valuation. If you have a settlement date, tell us at the start because it determines which lenders are realistic.

In almost all cases, yes, and it is worth understanding properly rather than signing past it. Directors of a company borrowing for the business are ordinarily required to give a personal guarantee, meaning that if the business cannot repay, the lender can pursue you personally for the debt. That applies to unsecured facilities as much as secured ones. A guarantee is not the same as a mortgage over your home, since it does not by itself give the lender security over a specific property, but a lender with a judgment can ultimately pursue your assets. Where a facility is secured directly by your home, the exposure is more immediate and direct. We set out exactly what is being guaranteed on each option, and where a spouse who is not involved in the business is being asked to guarantee, we recommend independent legal advice.

It is a factor rather than an automatic decline, but it needs to be handled openly. Lenders check the ATO portal on most business applications and an unlodged BAS or unmanaged arrears is treated as a serious warning sign, because the ATO is a preferential creditor and unpaid tax often precedes wider trouble. A formal payment arrangement that is documented and being met is viewed far more favourably than arrears sitting there unaddressed, and several lenders will work with a business in that position, particularly where the arrears arose from an identifiable event. Some lenders will even fund the ATO debt itself as part of a restructure. What causes files to fail is not the arrears but discovering them mid-assessment, so tell us up front and we will place the application with a lender who has appetite for it.