Business loans
Business term loans, explained.
Key takeaways
- Rates run from about 7% (property-secured, major bank) to 48% (private lender). Security (assets the lender can claim if repayments stop) and how soon you need the funds drive the spread.
- Unsecured, most businesses can borrow 10 to 20% of annual revenue. More with property or asset security.
- The lowest headline rate isn't always the cheapest loan. Compare true APR (annual cost including fees).
- Compare across our panel of 70+ lenders before any formal application, with no credit check until you choose to proceed. No credit score impact.
What Is a Business Term Loan?
A business term loan provides a lump sum upfront, repaid through fixed instalments over a set period - typically 3 months to 7 years, depending on the lender and loan size. Repayments follow an amortisation schedule: each instalment covers a portion of principal and interest, calculated so the loan is fully repaid by the end of the term.
Unlike a line of credit or overdraft, a term loan is a one-off draw rather than a revolving facility. That structure suits a single, defined use - buying equipment, funding an expansion, or consolidating existing debt - rather than ongoing working capital needs.
Secured vs. Unsecured, Fixed vs. Variable
| Dimension | Option A | Option B |
|---|---|---|
| Security | Secured - property/asset backed; lower rate, longer assessment | Unsecured - no collateral; higher rate, usually a shorter assessment |
| Rate Type | Fixed - locked for the term; predictable repayments | Variable - moves with the lender's base rate |
| Term Length | Short-term - 3 to 24 months; higher repayment, less total interest | Long-term - 2 to 7 years; lower repayment, more total interest |
Rate Benchmarks by Lender Tier (2026)
| Lender Tier | Rate Range (p.a.) |
|---|---|
| Major Banks | From about 7% |
| Second-Tier Banks | 9.9% to 15% |
| Fintech Lenders | 12% to 35% |
| Specialist Non-Bank | 9.9% to 18% |
| Private Lenders | 18% to 48% |
Indicative market ranges, not quotes. Your Compare Report shows the options you qualify for across our panel.
Understanding the True Cost: APR vs. Headline Rate
A lower headline rate doesn't always mean a cheaper loan. Fees change the real cost more than most borrowers expect - especially on shorter terms, where a one-off origination fee is spread across fewer repayments. Worked example: $150,000 loan, 12-month term, interest only (the principal repaid at the end).
LENDER A
10.4% p.a.
Origination fee: 4% ($6,000)
Facility fee: $50/month ($600/yr)
Total cost: $22,200
Effective rate: ≈14.8%
LENDER B
11.7% p.a.
Origination fee: 1% ($1,500)
Facility fee: None
Total cost: $19,050
Effective rate: ≈12.7%
Lender B carries the higher headline rate but costs $3,150 less over the year.
Check your numbers before you borrow.
See My OptionsHow Much Can You Borrow?
Borrowing capacity is sized against the business itself, rather than the amount requested. Lenders weigh six factors:
- Annual Revenue
- Most unsecured offers cap at 10 to 20% of annual turnover.
- Security Offered
- Property or asset backing raises the ceiling well beyond the unsecured range.
- Time in Business
- 12+ months trading opens the full panel; under 6 months narrows it to specialist lenders.
- Cash Flow Trend
- Lenders read 3 to 6 months of bank statements for stability, beyond volume alone.
- Existing Debt Load
- Existing facilities reduce serviceability (your ability to repay based on cash flow) for a new loan.
- Credit Score
- A clean file broadens the panel; defaults or late payments narrow it to non-bank options.
| Security Type | Typical Limit | Basis |
|---|---|---|
| Unsecured | Up to $500,000 | 10 to 20% of annual revenue |
| Asset-Backed | Up to $2M | Value tied to the asset financed |
| Property-Backed | $5M+ | Depends on the loan-to-value ratio (loan size against property value) |
Eligibility & Documents
Minimum eligibility varies by lender type, but most panels apply a similar baseline:
- Time Trading
- 6+ months for non-bank; 12+ months typical for bank lenders.
- Annual Revenue
- $72,000+ typical minimum across the panel.
- Credit File
- No active defaults for bank tier; non-bank options exist otherwise.
- Business Structure
- Company, trust, or sole trader; ABN active 6+ months.
| Document | Fintech / Non-Bank | Banks |
|---|---|---|
| Bank statements | 3 to 6 months | 6 to 12 months |
| Financial statements | Not always required | Required (2 years) |
| Tax returns | Rarely required | Required (2 years) |
| Identification | Director ID + licence | Director ID + licence |
Evaluating Term Loans on Security, Term, Amount and Rate
- Security
- Unsecured options available up to $500k; asset-backed facilities available without residential property caveats.
- Term
- Fixed 12 to 60-month loan amortisation aligned with expansion or cash flow cycles.
- Amount
- Loan amount sized against verified bank cash flow and turnover.
- Rate
- Full transparency on annualised percentage rates, origination fees and early payout discounts.
Pros & Cons of Business Term Loans
ADVANTAGES
- Predictable fixed schedules
- Large borrowing capacity
- Interest generally tax-deductible (confirm with your accountant)
- Preserves operational equity
DISADVANTAGES
- Upfront interest commitment from day one
- Potential break costs on fixed bank debt
- Director guarantees required
Business Term Loans vs. Other Finance Products
| Term Loan | Line of Credit | Overdraft | Invoice Finance | |
|---|---|---|---|---|
| How It Works | Lump sum, fixed schedule | Revolving limit, draw as needed | Buffer attached to bank account | Advance against unpaid invoices |
| Best For | One-off funding need | Ongoing working capital | Short-term cash flow gaps | Bridging receivables timing |
| Typical Rates | 9.9% to 48% p.a. | 14% to 25% p.a. | 14% to 20% p.a. | 1% to 3% per invoice |
| Repayment Structure | Fixed instalments over term | Interest on drawn balance only | Repaid as funds are deposited | Repaid when invoice is collected |
Real-World Case Study
MELBOURNE HOSPITALITY
A Melbourne café owner needed $120,000 for a kitchen renovation and new equipment. Her business bank, a major bank, offered a 3-year unsecured loan at 14.5% p.a. with a 2% establishment fee: about $31,100 in total borrowing costs. Her Compare Report matched her with 11 lenders, and the best fit was a second-tier lender at 10.2% p.a., secured by a GSA over business assets, with a 1.5% establishment fee: about $21,600 in total. She saved roughly $9,500.
Based on a real Trade Funding client, with details changed for privacy.
Frequently Asked Questions
What's the minimum revenue to qualify for a business term loan?
Most lenders set a minimum of around $72,000 in annual revenue for an unsecured facility. Bank lenders typically require higher, established turnover; some specialist non-bank lenders will consider newer businesses with lower revenue against strong cash flow.
Do I need residential property to secure a loan?
Not for most standard facilities. Unsecured term loans are available up to roughly $500,000 based on business cash flow alone, though most lenders still ask for a director guarantee. Residential property security can unlock larger amounts and lower rates, but it isn't required for most standard facilities.
Can I get a term loan with bad credit?
Yes, through specialist non-bank and private lenders - at a higher rate than the bank tier. A default or late payment history narrows the panel rather than closing it entirely.
Does comparing lenders affect my credit score?
Comparing through Trade Funding involves no credit check until you choose to proceed, so there’s no credit score impact. Only a formal application triggers a hard enquiry - this is why comparing before applying protects your file from multiple hard enquiries.
How long does a term loan take to arrange?
It varies by lender. Unsecured fintech and non-bank facilities usually take the least time. Bank and secured facilities take longer, due to valuation and formal credit assessment requirements.
Can I repay a term loan early?
Most lenders allow early repayment. Fixed-rate bank facilities may carry a break cost calculated against the remaining interest; fintech and non-bank lenders more commonly allow early payout with a discount on unearned interest instead of a penalty.
What's the difference between a term loan and a line of credit?
A term loan disburses a lump sum upfront with a fixed repayment schedule. A line of credit is a revolving facility - you draw funds as needed and pay interest only on the drawn balance, better suited to ongoing working capital than a single funding need.
Will I need to provide a personal guarantee?
Most lenders require a director's guarantee, regardless of whether the loan itself is secured or unsecured. It's a guarantee tied to the director, not additional collateral on the business assets.
How we’re paid
You don’t pay to compare. Lenders pay us.
How do we get paid?
Comparing costs you nothing. Not comparing can cost you plenty.
The headline rate rarely tells the whole story. Fees, charges and loan terms can add far more to what you repay. That’s why your Compare Report shows every cost we can identify side by side.
In most cases, the lender pays us, and only if you decide to proceed with their product offer. For more complex deals, or where the lender pays us little or nothing, we may charge a fee for our service. It doesn’t happen often, but when it does, it’s shown on your Compare Report and we’ll walk you through it before you decide.
No obligation to proceed, ever.
See the term loan options that fit your business.
No credit file impact · No cost to compare · No obligation
Or talk to us: 1300 161 641 · support@tradefunding.com.au