Calculate your loan repayments and total cost with a business loan calculator. Determine if your repayments would suit your budget and find the right loan for your business. Keen to know more? Monzi’s here to guide you through all the business loan information you might need to know. Let’s go.
Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.
What is a business loan?
As the name suggests, they are loans granted to businesses to help them fund operations, invest in new equipment or cover any other business-related expenses.
These loans come in many forms, so while there is the traditional lump-sum cash loan, businesses can also apply for overdrafts, lines of credit and business credit cards too. Each is different, however, they all serve to provide businesses with additional cash when they need it.
As with all loans, businesses must repay any amount that they borrow with interest.
Finally, businesses come in all different shapes, sizes and structures. As a result, loans can vary greatly in their size and terms. The loan that suits your business won’t necessarily suit another.
Business loan calculator
A loan calculator can help you determine what your repayments and total loan cost may be. Best of all, they’re totally free and offered by a range of financial institutions.
All you need to do is enter your key loan details including the loan amount, term and interest rate. From there, the calculator will spit out an estimate of your repayments and total cost.
You can then use this information to evaluate whether or not the loan is right for your business.
However, keep in mind that they are only an estimate. They simply aim to give you an idea of the possible costs.
Business loan calculator eligibility
In order to access credit, you will need to meet certain eligibility criteria. The specifics of these criteria will vary from lender-to-lender, however, they typically relate to the following:
- Cash flow and turnover: you will need to prove that your business has the capacity to make repayments comfortably.
- Credit history: you must have a demonstrated history of making repayments on time.
- Age of the business: some lenders may require that you’ve been in business for a certain period (e.g. 6 months). This can make it difficult for start-up companies.
- Australian Business Number (ABN) or Australian Company Number (ACN): you must be a registered business to be eligible.
The five C’s of business loans
Even once you are eligible, approval is not certain. Lenders will assess your application based on the Five C’s to determine if you should be offered a loan.
The five C’s are: character, collateral, capacity, capital and conditions. To help you out, we’ve provided a quick guide to each C below. Check it out:
In short, your business’ integrity. Does your credit report show a record of repaying debts on time?
The business’ ability to repay the loan. Is there sufficient income and cash flow to cover repayments? Lenders will also consider expenses and outstanding debts too.
Are there any assets that you could use as security on a loan. In other words, could the lender recover their losses if you default on your secured loan by repossessing an asset that you own. Could include equipment, vehicles or inventory as well as a host of other options.
What does the business have in terms of assets and liabilities? Could these assets be turned into cash quickly (i.e liquidity) if the business defaults on repayments. Lenders prefer to offer credit to businesses with sizeable capital reserves.
The conditions of the loan. May include repayment terms and interest rates. Are they favourable for the lender or for you? Typically, lenders will have terms they prefer.
Business loan calculator – before applying
When it comes to business loans, preparation is key. Not only will it potentially allow you to access seemingly instant loan approval, it will also help ensure that you can manage your loan effectively too.
So, before you apply, do the following:
- Consider your income, expenses and profit.
- Create a plan for how you will use your loan.
- Know what you can afford to borrow.
- Select your preferred credit type (e.g. overdraft or loan).
- Prepare the necessary documents and paperwork (e.g. income statements).
- Compare lenders and loans to find the right product for your business.
For more information, visit the Australian Government’s business website.
How much can I borrow for a business loan?
Your lender determines your borrowing limits. As you’d expect, the larger and more established that your business is, the more you will be able to borrow. Similarly, profitability and cash flow will play a role too.
If you are a small business looking to borrow a large loan, then one option could be to secure the loan with an asset. By guaranteeing the loan, the lender’s risk is reduced and as a result, you may be able to access more credit.
However, again, as discussed, your lender will ultimately determine your credit limit.
What is the average interest rate on a small business loan?
Small business loans may be difficult to access due to the fact that these businesses usually lack tangible assets and a consistent cash flow.
As a result, small businesses usually find themselves paying higher interest rates than established businesses. However, in terms of what the average rate is, we are unable to say.
In short, this can depend on whether apply for a secured or unsecured business loan, the cash flow and size of your business, the amount you borrow as well as the type of credit you are applying for.
Ultimately, as a small business owner, it is your responsibility to shop around and compare loan products to try and find the best deal.
How long can you get a business loan for?
Business loan terms can vary from as short as a few months, all the way up to decades. Obviously, the amount you borrow, as well as your lender, determine this.
For instance, you might be able to repay a $2,000 loan in just 12 months. By comparison, for a large business, a large loan could be repaid over several years.
Ultimately, select the term that works for your business. Pay your debt off as soon as you can with repayments that work for your budget.
Business loan calculator – how much is a deposit?
It varies. While some Australian business loans don’t require a deposit at all, others may require deposits up to 20-30%. In short, it comes down to not only your loan structure but loan amount and credit history too.
Typically, if a deposit is not required then you will need to secure the loan with an asset instead. Ultimately, they serve the same purpose. They exist to minimise the lender’s risk of lending you money.
As a result, consult with your lender before agreeing to any loan in order to determine if a deposit is required.
Which bank has the lowest interest rate on business loans?
Unfortunately, we are unable to say which bank will offer the lowest interest rate. After all, it will vary significantly based on your business characteristics and your loan amount.
As a general rule, established businesses with a number of assets and sold cash flow will be offered lower interest rates compared to new businesses.
If you are looking to access a lower rate than one option is to secure the loan with one of your assets. If your business does not have any assets then it you may be able to use a personal one (e.g. car or home). However, before doing this, consider the potential consequences for your personal credit score and financial situation.
How much are payments on a $50,000 loan?
Your repayment term and interest rate determine what your payments will be. Obviously, the longer your term, the smaller your repayments will be. On the other hand, a shorter term will produce larger repayments. Similarly, the more interest that you pay the higher your repayments will be.
Ultimately, when it comes to repayments, it’s about selecting the term that works best for you. While you want to get out of debt ASAP, that must be balanced against ensuring that your repayments are manageable.
As a result, before you apply, you must have a clear idea of the loan that you need. That’s where a business loan calculator can be useful. It will give you an idea of your total loan costs and repayments. From that, you can determine how they would fit with your budget.
Types of business loans
While when we think of a loan, we immediately think of a lump-sum cash payment, business loans actually come in a range of different forms.
- Line of credit: you can borrow cash when you need it up to a certain limit.
- Business overdraft: through your business banking account, you can overdraw (borrow) up to a specified amount.
- Equipment or vehicle financing/leasing: secured finance to fund the purchase of new equipment or business vehicles.
- Regular term loan: the classic lump-sum loan with a fixed or variable repayment term.
- Business credit cards: just like a personal credit card except you use it for business purchases.
What is the average business loan amount?
In short, there is no average. Businesses come in all different shapes and sizes and their cash needs do too. For a large business, loans over $100,000 are not uncommon. On the other hand, small businesses might only need a few thousand dollars to cover costs.
Ultimately, the average business loan is irrelevant. All that matters is your business. Consider how much you need to borrow and use a business loan calculator to determine if the repayments would be affordable for you.
Do business loans affect personal credit?
Business loans will only affect your personal credit if you guarantee the loan with a personal asset (e.g. your car). However, the effect (good or bad) will depend on how you manage your loan.
If your loan is only tied to the business or is guaranteed by one of the business’ assets then your personal credit score will not be affected. In this case, your business’ credit history may be affected.
Monzi and business loan calculators
Unfortunately, Monzi is unable to offer business loans. We’ve simply outlined all the key information that you might need to consider for your business. For the record, personal loans are our domain. However, if you need more calculator information, why not check out the credit card repayment calculator, next?
We’re a lender-finder service that makes finding personal loans online simple and convenient. All it takes is one simple, online application and we can potentially pair you with a lender offering cash loans up to $10,000. There’s no paperwork, our website is live 24/7 and our lenders offer quick outcomes.
The table below outlines a few of the loans past Monzi clients went on to be approved for.
|Quick cash loans||$900||Port Macquarie, NSW|
|Short term loans||$2,200||Geraldton, WA|
|Fast loans||$5,000||Whyalla, SA|
The above table contains only examples. The loan you’re potentially offered may not reflect what is presented above.
When you need a cash loan, Monzi can make it easy. Scroll up and use our loan slider to begin your application now.
Alternatively, for more business-related information, check out Monzi’s guide to starting a business in Australia.