Unsecured business finance is relatively new in the landscape – traditionally the only way to borrow for business was to offer security such as real estate. There is a raft of new products available from fintech lenders, who in turn are devising new and innovative loan types to compete with traditional banking. Application, approval and funding can be within 24 hours and there is generally no need for historical financial reports providing that the business has an ABN, is registered for GST and has been trading for at least 3 months.

In the application stage lenders look at the customer’s bank statements, assessing business turnover, regularity of income and timing of payments. Loan size is generally between 1 to 2 times monthly turnover, between $5,000 and $250,000, and repayment terms range between 3 months and 2 years. Repayments may be daily, weekly or fortnightly and are accessed by direct debit from the customer’s bank account.

An approved unsecured business loan facility may ultimately be used as a revolving line of credit – drawn down, repaid, then drawn again.

Unsecured business loans usually carry a high interest rate, with short repayment terms, resulting in high and very regular repayments, meaning that the customer needs to be clear about all aspects of the loan before entering into a contract.

Several of the larger Australian banks also now offer unsecured business loans at lower rates.