The short version
- A $100,000 business loan is usually a term loan with set repayments.
- Online lenders can often lend this much unsecured, at a higher rate.
- Ask for every fee in writing, as business loans don't show a comparison rate.
What a $100,000 business loan costs
Repayments depend on the rate, the term and whether the loan is secured. These examples leave out fees, which can be large on business loans:
- At 9% a year: $8,745 a month over 1 year, $3,180 a month over 3 years, $2,076 a month over 5 years.
- At 13% a year: $8,932 a month over 1 year, $3,369 a month over 3 years, $2,275 a month over 5 years.
- At 18% a year: $9,168 a month over 1 year, $3,615 a month over 3 years, $2,539 a month over 5 years.
Business loans don't have to show a comparison rate, so ask for every fee in writing and work out the total cost yourself.
Secured or unsecured
Many online lenders will lend $100,000 unsecured, often within a few days, but at a higher rate. Offering property or equipment as security usually lowers the rate.
What lenders look at
- Trading history. Banks usually want two years; some online lenders accept six to twelve months.
- Cash flow. Lenders check that your business bank statements show room for the repayments.
- A director's guarantee. Most lenders ask the owners to guarantee the loan personally.
Pros
- Set repayments over a set term, so you can plan cash flow.
- Money for growth now, such as stock, staff or fit outs.
- Interest is usually a business expense you can claim.
Cons
- Most lenders want a director's guarantee, so your own assets can be at risk.
- Fees can be large and aren't always shown up front.
- Early repayment fees on some loans.
Alternatives
- A business overdraft or line of credit, for costs that come and go. You pay interest only on what you use.
- Equipment finance or a chattel mortgage, for vehicles and machinery. The item secures the loan, so the rate is usually lower.
- Invoice finance, if customers are slow to pay. A lender advances most of what you're owed on your invoices.
How to apply
Lenders want to see that the business can repay a $100,000 business loan from its cash flow.
- Have your numbers ready. Usually two years of business tax returns and financial statements, recent BAS and business bank statements.
- Know your ABN details. Most lenders want the business to have traded for at least six to twelve months.
- Expect a director's guarantee. Many lenders ask the owners to guarantee the loan personally, even when it's secured.
- Ask about the total cost. Business loans aren't covered by the same credit laws as personal loans, so check every fee and the repayment schedule in writing.