Time is money: What you need to know about bank business loans

Anthony Bacic

Monday, 09 March 2020

It’s easy to get caught up in the excitement of your next big idea. But think twice before you head to the bank for business finance. These days, lenders come in all shapes and sizes, and they’re becoming increasingly competitive…

29% of SMEs who secure funds through banks say their business has been negatively affected by the long-winded process involved in applying for finance. It can take several months before you see any funding...if you get approved at all.

So, should you get a bank loan for your business or consider an alternative lender to fund your next project?

Let’s dive in and find out.

Pros and cons of business loans from a bank

Bank business loans are traditional forms of finance, similar to mortgages or personal loans. You know the drill: apply for finance, agree on a loan term and rate, and start chipping away at your principal and interest.

But, the process of applying for traditional business finance is rarely this simple. Especially if you’ve been on the other end of a ‘no’ from the bank. Ouch.

You’ll typically wait weeks or even months to see cash in your account, if you get approved at all. Business loans through banks are harder to qualify for, particularly for start-ups and SMEs who are still growing and establishing themselves.

On the flipside, business loans offered by banks often come with great interest rates and the comfort of familiarity. Many of them have big names you’ve already heard of, and if you want to pop into a physical store, your lender will often have a branch close to home.

But what options are there if you don’t qualify with the big guys, or want to skip mounds of paperwork?

Alternatives to bank business loans

If you don’t qualify for a bank business loan, there are alternative options available through non-bank lenders.

Though non-bank lenders are often privately-owned, they’re still regulated by ASIC, making them a viable finance option—particularly for startups and SMEs having trouble securing finance traditionally.

The fast and relatively pain-free application process associated with alternative lending is also a huge plus for business owners who don’t have the time (or, let’s be honest, patience) for traditional applications. After all, finding enough time in the day is hard enough when you’re constantly wearing several hats.

It’s important to note: due to the risk involved in non-bank lenders offering finance to less established companies, their business loans often come with higher interest rates.

And, if familiarity is important to you, going with a lender you’ve never heard of before can potentially raise concern. Consider what’s important to you and weigh up pros and cons when deciding what’s right for you.

Best bank business loans

If you decide a bank business loan is best for you, determining which one to go with can be a daunting task. With so many banks out there, and hundreds of products to consider (each catering to different business needs), there’s no universal answer as to which business loan you should go with.

This mightn’t be the answer you want to hear, but that's where Valiant comes in—our team leverages relationships we’ve built with 80+ Aussie lenders, to find and negotiate a great rate tailored to your business circumstances and objectives. Save your time and speak to a Valiant product specialist.

If you decide to do your own research, note that product offerings change regularly, so it’s best to check in with each lender to confirm interest rates, fees and available terms.

Your lender should also take the time to understand how your business works (e.g. how you manage cash flow and operate day-to-day) in order to provide a tailored solution that best fits your needs.

What can you use a business bank loan for?

Business bank loans can be structured in several different ways depending on your goals and objectives. Rather than dipping into your savings to fund business activities (which can disrupt cash flow), taking out a business loan can be a wiser move.

Many business owners take out loans to support working capital and other business expenses like supplies, equipment, furniture and inventory.

Types of bank business loans

Secured term loan: a secured term loan is your typical business loan, with consistent repayments (usually monthly) and a set term of up to 15 years. You’ll provide collateral to back your loan, hence ‘secured’.

Unsecured business loan: similar to term loans, you’ll make consistent repayments over a set period of time, except there is no need to secure your loan with any assets upfront. Unsecured business loans are therefore ideal for SMEs without owned assets or property, and businesses who do not want to put their assets on the line.

Business overdraft: a business overdraft account essentially allows you to withdraw more than you've saved. For example, if you have $20,000 sitting in your business overdraft account, but need $30,000 to pay a supplier, no problem—take what you need (up to a set limit) and pay it back when you can, along with interest.

Fixed rate loan: a fixed rate business loan allows you to lock in an interest rate for a set period of time (often five years) regardless of market changes. You’ll know exactly how much you owe each month, which is great for business owners who want predictability and control.

Variable rate loan: your repayments will change as the market changes. If interest rates increase, so will your repayments and vice versa. While repayments are not as predictable as those associated with fixed rate loans, you will benefit when interest rates are down.

Low-doc or no-doc business loans: when applying for low-doc and no-doc loans, little paperwork is required. This makes them ideal for sole traders, startups and small businesses who often wear several hats a day and have little time to spare. Low-doc and no-doc business loans are quick to apply for, and can sometimes even be finalised online or over the phone, so there’s no need to make time for tedious applications.

Keep in mind that business loans are just one subset under business debt finance, and there are many other ways to fund business initiatives. Alternatives include business credit cards, lines of credit, merchant cash advances, debtor financing and equipment financing.

Choosing a bank business loan

If you’re an established business looking to grow or expand, a bank business loan could be a great option for you.

But you’ll want to make sure your credit history is in good shape before applying to give yourself the best chance of a successful outcome. At Valiant, we can check what you qualify for before starting an application to protect your credit reputation.

Finally, comparing every finance product on offer to find the best solution for your business means researching thousands of loans in-depth. As a business owner, you’re already scrounging for time, so this isn’t a feasible option.

Let Valiant take a load off your shoulders with 100+ years combined experience in finance, pioneering technology and a trusted panel of 80+ Aussie lenders.

Take care of you, while we take care of business.


Anthony is a Private Lending Specialist with over 10 years experience in the finance industry. He loves helping clients and SMEs achieve their business dreams with start-up loans, and tailoring finance solutions to maximise their opportunities.

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