Business Term Loan

A Business Term Loan is a long term loan for a business that can be used for a wide range of purposes. This type of loan is best suited for funding long term business initiatives such as a business acquisition, new equipment, fit out of premises and other long term growth initiatives.

A term loan can either be secured by the business assets only (through a General Security Agreement or "GSA") and director(s) guarantee or also bolstered by property security owned by the shareholders outside of the business.

Term loans are generally a 1yr to 5 yr term and can be interest only or amortising over the life of the loan (to zero or to a balloon repayment amount).

The pricing on a business term loan typically starts around the 4.0% level with property security and 5.5% without property security.

Key features of a Business Term Loan

Typical terms

Loan size: $250k +

Interest rate: 4-8% bank, 5.5% + non-bank

Term: 1yr to 7yrs

Repayments: Monthly

Security: GSA + director(s) guarantee as a minimum

Pros and cons

+ No property security required

+ Flexible use of funds

+/- Approval process can be quick though varies by lender

- Can be less flexibility in terms/repayment profile 

Lenders

Banks

Credit funds/investors

Non-bank lenders

Fintechs

Business Overdraft or Line of Credit

A Business Overdraft or Line of Credit is a revolving loan facility that can be constantly dranw down and repaid by the business. This type of facility is most suited to funding short term working capital requirements.

A Business Overdraft or Line of Credit can either be secured by the business assets only (through a General Security Agreement or "GSA") and director(s) guarantee or also bolstered by property security owned by the shareholders outside of the business.

Interest rates for an unsecured business overdraft or line of credit will generally start around 5.5% p.a or lower in the event that it is property secured.

The term on the loan will typically be short term (1-2 years) and rolled over at the end of each period. 

Key features of a Business Overdraft

Key terms

Pricing: 4.5% (banks), 7% + (non-banks)

Term: 3m to 2 years  

Security: GSA + director(s) guarantee as minimum 

Loan size: $20k +  

Pros and Cons

+ Flexible use of funds

+ Quick approval and funding available

- More expensive than a term loan

Lenders

Banks

Non-bank lenders

Fintechs

Invoice and debtor finance

Invoice finance (also called debtor finance and invoice discounting) can be a great funding solution for businesses with flexibility in the use of funds and the ability to easily scale up the size of the loan facility with the growth of the business. Invoice/debtor finance is essentially a loan facility that is secured against the businesses debtors/receivables or can sometimes involve the full sale/factoring of these debtors/receivables to a third party.

Invoice discounting is provided by two of the major banks and invoice finance and factoring is offered by a large number of non-bank lenders, fintechs and peer to peer lending platforms.

Key features of invoice/debtor finance

Key terms

Pricing: 5-7% (banks), 7% + (non-banks)

Loan size: $50k to $20m (up to 90% of outstanding debtors)

Security: Debtors + director(s) guarantee

Repayment: Upon payment of client invoice

Pros and Cons

+ Can be cost efficient source of funding

+ Facility that can grow with the business

+ Approval process can be quick and efficient

- Can add administration workload

- Some lenders have various hidden costs

Lenders

Banks

Fintechs

Peer to peer platforms

Equipment Finance

Equipment finance can be a useful funding tool for businesses with cost competitive interest rates, a quick and simple loan approval process and no personal property security required. 

Any item of equipment can typically be funded with some of the more popular equipment items being trucks and trailers, forklifts, mobile cranes, manufacturing equipment, fit outs and commercial kitchen equipment.

CreditSME has realtionships with all of the major bank and non-bank equiment financiers in the market and can promptly secure your business the best deal available.

Key features of equipment finance

Key terms

Loan size: $20k to $20m

Interest rates: from 4% p.a

Funding available: Up to 100% of equipment cost

Loan term: Up to 5 years 

Pros and cons

+ cost effective form of business funding

+ no property security required

+ low doc loans available

+ most new and used equipment can be funded

+ quick and easy approval process

- often minimal benefit in early repayment

Lenders

Banks (major and regional)

Specialised equipment financiers

Credit funds

Peer to peer lending platforms

Fintechs

Trade Finance

Trade Finance comprising import finance, export finance, purchase order funding and supply chain finance can be a cost effective way of funding your business and without the need of the owners to provide property security. 

For importers, trade finance typically works by the lender making the payments to your suppliers (domestic or international) and your business repaying these amounts within an agreed time (up to 180 days). These facilities can be structured to suit your business requirements.  

For exporters, there are a variety of funding options available that will depend upon the terms of trade and product being sold.

Interest rates on trade finance facilities can start around the 4% p.a range with bank lenders and from 6% p.a with non-bank lenders.

Key features of Trade Finance

Key terms

Facility size: $50k to $50m

Interest rates: From 2.5% p.a 

Terms: Up to 180 days repayment cycle

Security: GSA + director guarantees

Pros and cons

+ Cost effective form of business funding

+ Funding available in mutliple currencies

+ No property security required

+ Can be tailored to requirements

- Funds only to be used to pay suppliers

Lenders

Banks (major and regional)

Non-bank lenders

Fintechs

Credit funds/Private lenders

Acquisition Finance

Acquisition finance can be one of the more difficult financing facilities to put in place though CreditSME has extensive experience in this area to get the optimal loan terms for our clients with an efficient and seamless loan approval process.

CreditSME has access to both bank and non-bank lenders that can fund your business acquisition and give you confidence that you can execute a transaction with the vendor. Lenders will typically lend up to 70% of the cost of an acquisition and potentially higher when also considering the value in the purchasing business.

Loan pricing on acquisition finance facilities and the amount of funding available for an acquisition can vary widely though we can quickly and confidently provide indicative terms early in the process to give our clients confidence to proceed through due diligence knowing what funding will be available for the transaction. 

Key features of Acquisition Finance

Key terms

Loan size: $100k to $50m 

Interest rates: from 4.5%

Funding available: Up to 100% of purchase price

Security: GSA + director guarantee(s)

Loan term: Up to 10 years

Pros and cons

+ Can be tailored to suit funding requirements

+ No property security required

- Can be a timely process for loan approval and funding

Lenders

Banks (major and regional)

Non-bank lenders

Credit funds / Private investors

Fintechs

Peer to peer lending platforms

Construction and development finance

Development finance can be used by businesses, developers and investors for the development of a property (residential or commercial property). This form of funding covers construction finance, land bank funding and residual stock loans.

Funding available from banks, superannuation funds, credit unions, credit funds, non-bank lenders and private investors and cover senior, stretch senior and mezzanine funding.

Interest rates start at 3.50% p.a and will be determined based on a number of factors including the LVR, profile of the property and sponsor and level of pre-sales (if applicable). 

Key features of construction finance

Key terms

LVR: 65% (banks) - 80% (non-banks) LVR 

Interest rate: 3.5% +

Security: Property security

Repayments: Can be capitalised

Pros and cons

+ Can be structured to meet funding requirements

+ Competitive pricing available

+ Depth of lenders and investors in market to provide funding

- Application and approval process can be quite detailed

Lenders

Banks and credit unions

Institutional investors

Non-bank lenders

Private investors

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