Accounting & Finance

The advantages of getting an unsecured business loan before the end of the financial year

Written by Shaun McGowan

The financial year-end is fast approaching, and if you’re considering finance for your business, now is the time to act.

Here’s why:

  •  Many lenders will want to see your bank statements and tax returns in order to assess your small business loan application.

Once you pass that all-important 30 June deadline and enter a new financial year, last year’s tax return will be out of date. You may have to wait until you’ve got your financial affairs in order and filed your 2017/18 tax return before you’re in a position to apply for a loan-delaying your cash injection by weeks or even months.

  • Until 30 June 2018, small businesses qualify for instant tax deductions on assets worth less than $20,000. However, this allowance will fall to just $1,000 from 1 July. By taking out an unsecured loan now and making any planned purchases of businesses assets or equipment, you’ll be able to take advantage of the current high threshold and claim a deduction in this year’s tax return.

(Note – you will need to check with your financial advisor to find out whether this will be advantageous for your business, based on your individual financial circumstances and tax position).

Why consider an unsecured business loan?

Of course, there are many ways to secure finance for your business – from external investment, peer-to-peer funding to the traditional secured bank loan. So why might you consider an unsecured business loan?

Here are the top five reasons why unsecured business loans are the most popular form of funding for Australian SMEs:

  1.   Speed

The end of financial year (EOFY) is nearly upon us. There are many other forms of funding, which take a great deal of time and effort to set up (banks and investors alike will want to scrutinise your financial performance,your business plans and your reasons for seeking funds), but you can apply for an unsecured loan on the spot.

Unlike the process of getting a secured bank loan, which requires lots of preparation and weeks of assessment, an online lender may assess your application within minutes, and you could have the funds in your account within hours.

  1. Accessibility

As well as being slow, bank finance isn’t always available to all. Generally, only businesses with two or even three years’ profitable trading history, a high average turnover, a strong credit rating and collateral to offer, will qualify for a small business loan from a bank.

An unsecured loan, on the other hand, is within reach of most businesses that have been trading for six months or more. These days there are so many online lenders specialising in
unsecured business loans that even businesses with poor credit ratings may be able to access finance, at a price.

  1. Ease of application

Applying for an unsecured loan online is nothing like the arduous process of applying for a bank loan. Complete a simple form, upload your supporting documents, and you could have an instant answer.

Even preparing your supporting documents will probably be quick and straightforward – most online lenders want to see ID documents and bank statements or tax returns, not the full financial statements, cash flow projections and business plans required by traditional lenders.

  1. No collateral required

With an unsecured loan, you don’t need to have property to offer up as collateral. This makes it suitable for businesses with little or no assets. Of course, an unsecured loan is a higher risk for the lender so you can expect to pay more for your finance than you would if you had security to offer.

  1.  Choice

There are so many lenders to choose from that there’s a good chance you’ll be able to find a lender who will offer the terms, rates and repayment schedule you need. Many will allow you to match your repayments to your income, which is ideal for seasonal businesses.

Comparing the cost of unsecured loans can be tricky – you need to compare all fees and costs as well as interest rates. It’s also important to check the terms and conditions of each
loan, as alternative lenders don’t operate under the same restrictions as the banks.

It’s wise to seek independent financial advice before applying for any form of business finance.

“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."

About the author

Shaun McGowan

Shaun McGowan is a digital strategist and entrepreneur who has utilised his expertise to grow multi-million dollar businesses from the ground up. His philosophy is “domain name first; business concept second” premised on the firm belief that any successful business can be developed with the right online “real estate”.

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