poppyThe basics
A business loan is money a lender pays to your business, which you repay over an agreed term along with the cost of borrowing. Every loan comes down to four things: how much you borrow, how long you have to repay it, how much it costs in total and what happens if you can’t repay it.
The main types of business finance in Australia
- Term loans (secured): usually from a bank, secured against property, repaid over several years. Typically the lowest cost, but slower and more paperwork.
- Short-term business loans: 3 to 24 months, often unsecured, repaid weekly or daily. Faster and simpler, but cost more. This is what Poppy offers.
- Overdrafts and lines of credit: a limit you draw on and repay as needed. Good for ongoing, variable needs.
- Equipment finance: a loan or lease secured against the equipment being bought.
- Invoice finance: an advance against your unpaid customer invoices.
How the cost is worked out
Lenders show cost in different ways. Banks usually quote an interest rate. Many short-term lenders quote a fixed fee or a total amount to repay. That makes comparing tricky, so the most useful number to compare is the total amount you’ll repay, including every fee, over the same term.
Ask every lender for: the loan amount, the term, each repayment and how often, the total to repay, and any fees for setting up, paying late or paying early.
How repayments work
Most short-term loans are repaid by automatic direct debit, weekly or sometimes daily. Poppy loans are repaid in equal weekly amounts, so you always know what’s coming out. Before you borrow, check the repayment against your quietest weeks, not just your average ones.
Secured, unsecured and personal guarantees
A secured loan is backed by an asset the lender can claim. An unsecured loan isn’t, but the lender will usually ask directors for a personal guarantee. Read our guide to secured vs unsecured business loans.
What applying looks like
Banks usually ask for two years of financial statements and tax returns, and may need a property valuation. Online lenders like Poppy usually assess your bank data, ID and ABN instead. See business loan requirements for a full checklist.
Questions to ask before you sign
- What is the total amount I’ll repay, including all fees?
- What is each repayment, and can my business afford it in a slow week?
- Is there a fee or saving if I repay early?
- What happens if I miss a repayment?
- What am I personally guaranteeing?