Start-up business loans

Why start-up lending is harder

Most business lenders answer one question before any other: how has this business performed? They read bank statements, BAS and tax returns to see turnover and conduct. A brand-new business has none of that, so the usual assessment doesn’t work.

That doesn’t mean new businesses can’t borrow. It means they borrow on different grounds: security, the asset being bought, the strength of the plan and the experience of the owner.

The routes that actually work

Route	How it works
Property security	Use a home or other property to secure the loan; see using your home
Equipment finance	The equipment secures the loan; see equipment finance
Franchise finance	Some lenders back established franchise systems; see franchise finance
Buying an existing business	Lend on the existing business’s history; see business acquisition loans
Your own contribution	Savings or equity reduce what you need to borrow

Buying an existing business is often overlooked. Because it already trades, lenders can assess its history, which can make funding easier than starting from scratch.

What lenders want to see from a start-up

1. A business plan: what you’ll sell, to whom, how you’ll find customers and what it’ll cost.
2. Financial forecasts: a realistic cash flow forecast for at least the first twelve months.
3. Your experience: relevant industry or management experience matters enormously.
4. Your contribution: how much of your own money or equity you’re putting in.
5. Security: property or the asset being financed.

Start lean, borrow smart

New businesses often borrow too much too early, then carry repayments before revenue arrives. Consider:

• financing equipment rather than buying outright, to preserve cash,
• funding the fit-out separately so it’s spread over time,
• keeping a cash buffer for the first months, and
• moving to unsecured cash flow lending once you’ve built six to twelve months of history.

An illustrative example

An experienced mechanic leaves a dealership to open their own workshop. With home equity, a second mortgage funds the lease bond and initial stock, while equipment finance covers the hoists and diagnostic gear. (Illustrative only.)

Want a specialist’s view of your start-up plan? Tell us about it.

What else is start-up business loans called?

Lenders, accountants and search engines don’t all use the same words. You’ll also see this entry described as New business loan and Startup finance. In our A–Z index every one of those names points back to this page, so whichever term you searched, you’ve landed on the same thing. If a lender uses a name you don’t recognise, ask them to describe how the security, the term and the repayments work; that tells you far more than the label.

Where does it sit in the directory?

This entry lives on the cash flow and unsecured shelf. It’s most often used for buying, starting or growing a business, and the security usually involved is whatever suits the deal, from nothing at all to property. It usually involves a little more paperwork and assessment than the quickest options, so start early. Its closest neighbours are:

• Unsecured business loans — No property on the line — typically $5,000 to $500,000 for trading businesses.
• Revenue-based finance — Repayments flex with your daily sales or card takings.
• Bad credit business loans — Past defaults or a declined bank application don’t automatically end the conversation.
• Low doc business loans — Borrow on BAS, bank statements or an accountant’s letter when tax returns lag.

To compare all of them at once, filter the Loan Finder by purpose and security.

Common mistakes to avoid

• Starting with the product instead of the purpose. Decide exactly what the money must achieve, then choose the structure that fits it.
• Not comparing secured and unsecured options. The same need can often be met either way; the right answer depends on amount, credit and timing.
• Under-estimating the total cost. Ask for the full amount repayable in dollars, including every fee, before you compare offers.
• Applying everywhere at once. Multiple applications can leave a trail of credit enquiries. One well-prepared enquiry is better.
• Leaving it until the last minute. Facilities are easier to arrange while trading is strong, not in the middle of a crunch.

What should I ask before signing up for start-up business loans?

A short list of questions saves a lot of regret. Put these to any lender or specialist before you commit:

1. Which structures did you consider for me? A good specialist explains why one option beats the others for your situation.
2. What’s the total cost in dollars? Compare like with like across secured and unsecured offers.
3. What security or guarantees are needed? Know exactly what’s on the line before you sign.
4. How are repayments timed? Match frequency to how money comes into your business.
5. What happens if things change? Ask about early repayment, top-ups and hardship options.

If an answer is vague, ask again or ask for it in writing. Good lenders are happy to explain their terms clearly.

Give your new venture the right start

If you’re starting out and need funding, a short enquiry is the best first step. There’s no credit check when you enquire, and it’s handled by one person, not passed around to lenders indiscriminately.

Please be accurate about what you’re starting, your experience, your contribution and any property you own. That’s what lets us show you a realistic path. Start your enquiry.