How to get a business loan without collateral in Australia?

Apr 05, 2024

Startup owners thrive and hustle every day to see their business bloom into an empire. If there is one thing that acts as a deal-breaker in this journey, it’s money.

When some coax their investors for finances, others rely on banks and lenders to take the next step. Every small and mid-sized business that struggles with this stage should know about no collateral business loans.

As a rule, banks and financial institutions expect borrowers to pledge a security source as collateral, if the loan amount is high. But a business loan without collateral is the opposite of this. You will be granted business loans without any collateral.

Traditional banks are very clear about their collateral policies as they don’t want to risk losing their money, if the company dissolves.

But collateral free business loans are the game changers as they not only aid startups financially, but they believe in their business plan when others don’t.

Factors to consider before applying for a business loan without collateral

Already started your application process? Keep the following factors in mind before sending your application. Lending companies don’t expect collateral if it’s a collateral free business loan.

Regardless, they have other sets of parameters that they weigh and analyze. Knowing them and making a strong first impression will fetch you your approval.

1. Should have a strong business plan

Your business plan can predict if your business will sustain and make profits. With a strong team, your lender can predict the strength of your business plan.

Submitting a plan filled with bottlenecks and holes can force them to reject your application. Revise your business plan considering it from all angles, and talk to your other partners.

Your business plan is a prediction of your future implementation and success. Make it strong and unshakeable.

2. Have a good credit score

If you are already in the business world for a while, you have a credit score already.

Quickly check your current credit score and compare it with the requirements of the lender you selected. Most institutions prefer a good credit score as it’s the reflection of your integrity and sincerity.

3. Age of business

Each bank has its own requirements for approving no collateral business loans. Some lenders like to fund beginners who are just starting out. And some others expect the business to have existed for at least a year.

Choose your lender after confirming this, as they value your profile mainly based on criteria around this factor.

What are the business loans available without collateral in Australia?

1. Short-term unsecured loans

Many established lenders offer short-term business loans in Australia. This is a business loan without collateral that the borrower should pay within a short term (within a year).

The loan amounts that borrowers can get are between $30,000 to $500,000, depending on the bank and the borrower’s creditworthiness.

Since this is a collateral free business loan, they expect you to have a good credit score.

These requirements can change depending on the bank you choose.

● To meet the expected number of years the company has existed and the turnover.

● Should have a decent credit rating

● Should have an ABN number and registered with GST

● The applicant must be a permanent resident of Australia

● Should be ready to provide bank statements if asked.

While you can save your assets and get money promptly, higher interest rates and shorter tenure are drawbacks.

In positive terms, they consider both new startups and established companies and make adjustments to their requirements based on this. And the processing time is too fast, and within days or weeks, you can draw the loan amount.

2. Equipment finance

Want to modernize or expand your business and need machinery for that? An equipment finance loan can sort it out for you.

There are many key funding agencies in Australia that sanction equipment loans for businesses to invest in modern gear. To say particularly, Max funding is one of the lenders in Australia that instantly processes startup loans like equipment financing within minutes, and there is no collateral required. 

There are different types of equipment purchases involved in a business. You can rent, lease, buy or go for hire purchase. Your loan amount requirement will be based on this decision.

This loan is more or less similar to the short-term, no collateral business loan with a small amount being offered. You can loan anywhere between $ 5000 to $ 1,000,000. You would love their flexibility in organizing the repayment tenure to suit your capacity. 

As a major requirement, you will be requested to share proof of positive cash flows in the recent months/quarter and a good credit score. And you can flexibly arrange your repayment tenure to match your flowing cash flow with the help of cash flow predictions your finance team made.

3. Trade finance

Trade finance is a common-led practice in Australia where the lenders boost up the working capital or running cash flow of the borrowers in order for them to buy bulk stocks from their suppliers.

Raw materials and goods purchase is an important expense, and without that, a business cannot increase their outlet quantities. Yet, spending huge money on this will let their cash flow go down. That’s where trade finance helps.

The trade financier facilitates the purchase by providing funds, whether the goods are purchased within Australia or imported from somewhere. This loan can sometimes be a collateral free business loan.

In the rest, your current stocks and receivables are considered collateral to source the funding required for goods purchases. But the good news is that you don’t keep your tangible assets as collateral but only the outstanding payments that are sure to flow in.

Trade finance is rather an umbrella term that denotes the broader concept. There are invoice financing, stock financing, purchase order financing, supply chain financing, and many more. To be eligible for this, you might have to share your financial statements, cash flow documents, purchase, and sale-related documents with the lender. 

4. Invoice finance

Invoice financing is a part of equipment finance. You can consider this as a business loan without collateral. In this loan, you can collect and pay your invoices through the fund provided by the lender while pledging the receivable invoices you have sent out to your customers.

Small businesses generally rely on their customer payments to build their cash flow and manage business expenses. When they get delayed, your business operations get stalled due to the non-availability of funds. 

If reminding the clients to pay their invoices is one option for you, keeping the pending receivables to receive funding is the best way out. You can receive a loan anywhere between $ 5000 to $ 15 million, depending on how much your customers owe you.

If you don’t want your current debts and low capital to stand in the way of your funding and growth, invoice finance is the right way to navigate this. Basic eligibility criteria are to have a registered ABN number, yet to receive pending payments from Australian customers, and to have pending invoice payments to make.

5. SME restarter and recovery loans

Many Australian lenders are providing recovery loans backed by the Australian government. The Australian government attempts to help small businesses recover from the damage that Covid-19 has caused.

The borrower can get up to $ 5 million to salvage the losses and restart their operations. The businesses eligible to receive funds through this should have made less than $ 250 million turnover.

Top Australian lending institutions like ANZ, shift, Earlypay, Bank of Queensland, etc., are the participants of this scheme. This is a collateral free business loan, but secured loans are provided too.

To apply, eligible businesses can directly contact the lender banks, and they get to decide if you can be approved or rejected.

Suggested reads: All you need to know about small business grants in Australia

Benefits of collateral-free business loans

Companies prefer a business loan without collateral for many reasons. Though it primarily caters to cash needs, it can benefit the applicant in many other ways.

1. The loan amount is independent of the asset value

Lenders decide the loan limit by valuing the collateral first. When it’s a no collateral business loan, they give importance to your business plans and strategies rather than the asset.

This way, you get exactly what you need to expand or reform your business. Even the secured loans don’t offer the entire value but a part.

2. Timely financing

By timely financing, we don’t only mean the quick approval and fund distribution into your account. It also means how you can tap into your untouched resources to get financing at the right time without depending on your customer payments.

With this on-the-spot financing, your business can resume operations without delay and slowly increase its cash flow potential.

3. Reduced paperwork

Collateral-free business loans demand less paperwork. The documents they require will be readily available or easily accessible by the businesses.

So, you won’t waste time on document preparation and proceed with the application process.

4. Protect your assets

The banks can seize mortgage assets if there are interruptions in your due payments. Don’t lose your valuable assets to such short-valued secured loans.

A business loan without collateral funds you whether or not you have acquisitions to pledge.

How can Volopay help businesses in Australia?

While there are no collateral business loans to meet your long-term business needs, you have to spend a whole year or more than that to pay them off fully.

In this operation, your other disbursements can go for a toss if your cash flow is not planned and projected. Monthly expenses are unavoidable in every business, and you cannot delay them or wait till your customer sends your payment.

The easiest way to manage the small finance requirements of SMEs is by borrowing a line of credit. Fret no more, as Volopay offers seamless credit line lending for you to meet your short-term business goals. 

Fundamentally, Volopay is a payment management system that favors you to send business payments digitally. You can either load your money into the Volopay wallet to do this or borrow our line of credit monthly by just accomplishing a two-step process.

Get Volopay today and streamline your accounts payable without exhausting your monthly cash flow.

Avail flexible business credit line from Volopay