Unsecured Business Loans - Online Lenders

A large number of new online business lenders have entered the market over recent years. These lenders vary significantly in the quality of the loan products and interest rates that they offer. Some lenders offer a great funding solution for businesses whilst others have extremely high rates, hidden costs and other onerous terms and should be avoided.  

The key loan products offered by the online lenders are either a short term loan that is repaid over the term of the loan or a short term line of credit.

Unsecured Business Loan Types

Term loan

  • Loan size: $10k to $300k
  • Rates: from 1.0% per month
  • Repayments: Fixed amount
  • Frequency: daily, weekly or monthly
  • Term: 3m to 12m
  • Early repayment: Yes

Line of credit

  • Loan size: $10k to $300k
  • Rates: from 1.0% per month
  • Repayments: Variable
  • Term: 1 week to 12m
  • Early repayment: Yes

Other

  • Loan size: $10k to $300k
  • Rates: from 0.8% per month
  • Repayments: Structured
  • Term: Up to 12m
  • Early repayment: Yes

What to look out for?

The key factors to look out for are the effective interest rate and any early repayment penalties. 

Interest rate - Often the most confusing aspect of unsecured business loans for borrowers, especially those priced with a factor rate. The most important thing to be aware of is the factor rate does not equate to an interest rate. The true interest rate will be determined by total interest cost and the average loan balance over the term of the loan (ie. reflecting the reducing balance of the facility with the regular repayments). CreditSME can provide you with a true effective interest rate on any business loan facility.

Early repayment costs - Not all of the unsecured business loans can be repaid early without incurring an early repayment penalty so borrowers just need to be aware of this.

Overall, unsecured business loans can be a great short term funding solution for businesses. as long as there is a full understanding of the terms/costs of the loan. Most importantly, the returns on the use of the funds from the unsecured loan should exceed the costs of the facility.   

Key features

Interest rates

Factor rates - Factor rates apply a % the original loan amount to work out the total repayments to the loan. This is not to be confused with an interest rate (see below). Typical factor rates range from 108% to 130%; or

Monthly interest rates - Typical monthly interest rates range from 1% to 3% per month.

Term

The loan terms offered by the unsecured business loan lenders is typically between 3m and 12m. In most instances, the loans are repaid in equal (daily, weekly or monthly) instalments over the term of the loan.

Approval

For loans less than $75k, typically only business bank statements and ID verification required for loan approval.

For loans > $75k, financial statements and ATO portal statements will likely also be required. 

The approval process for most lenders is completed within 24 hrs.

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