1. Understand your loan purpose
Being clear on why you want to borrow is the first step to choosing the right loan and it’s one of the first questions you’ll be asked by a lender.
Common reasons for taking out a business loan include:
2. Work out the loan amount
If you’re looking to borrow so you can buy an asset, knowing the amount you need will be straightforward. However, if you’re borrowing to cover a potential cash shortfall, working this out can be a little more involved.
3. Calculate what you can afford to repay
The length of the loan will impact your repayment amounts. Your lender can outline the different loan term options in detail. But before you have this conversation, work out what you can afford to repay each month. You can do this by looking at your business’ past financials and completing cash flow forecasts.
4. Decide between a secured or unsecured loan
You’ll usually be able to choose to have your loan secured or unsecured. Each has its benefits as well as considerations.
Secured
- You offer an asset for the loan, such as property
- The interest rate will usually be lower than unsecured
- The lender may sell your asset if you’re unable to repay the loan
Unsecured
- No asset is offered
- The interest rate is usually higher
- It can sometimes be more difficult to be approved for an unsecured loan
5. Choose a fixed or variable interest rate
As with other types of loans, you’ll often have the choice between a fixed or variable interest rate for your business loan. A variable rate may suit you best if you’re confident you can repay the loan even if rates increase. A fixed interest rate may be more appropriate and help manage your cash flow better by providing certainty with your repayments. Calculate what your repayments might be with our business loan calculator.
6. Understand the fees and charges
Make sure you understand the true cost of any loan by comparing all the fees and charges. Some fees you may be charged include:
- Establishment or application fees
- Ongoing monthly fees
- Early repayment fees
- Exit fees
- Valuation fees (if you choose to secure your loan)
7. Get your paperwork ready
Preparing your business documents is an essential step that could help the lender make a decision sooner. Check out our guide to what information you’ll need to apply for a business loan.
8. Speak to an expert
A CommBank business banker can call you to discuss in more detail which business loans may suit you and answer any questions you may have.
Book an appointment to talk to our lending specialists at a time that suits you or explore our range of business loans, overdrafts and finance options.
