A Beginner’s Guide to Getting an Unsecured Startup Business Loan

By: Aaron Robbins

Starting a new business venture requires much planning, consideration, research, and of course, finance. One of the most common hurdles aspiring entrepreneurs and small business owners face is securing the necessary funding to transform their ideas into reality. While various financing options are available in Australia, unsecured startup business loans might be an attractive choice for those who wish to avoid collateral requirements.

This guide aims to provide aspiring startup business owners with essential information on obtaining unsecured small business loans.

What is an unsecured business loan for startup businesses?

Unsecured business loans are a type of financing where borrowers do not need to provide collateral to obtain funds. Unlike a secured loan, which requires an asset such as real estate property or equipment as security, unsecured loans are granted solely based on the borrower’s creditworthiness, business plan, and financial history.

office, startup, business

What to look for when seeking unsecured finance for a startup business

In Australia, numerous lenders offer unsecured loans tailored to startups and small businesses. Unsecured start-up finance may provide the necessary capital to cover startup costs, purchase equipment, hire staff, or manage day-to-day operations while in the interim phases of business growth.

When considering unsecured startup business loans in Australia, you may wish to keep the following key points in mind:

Loan eligibility criteria

Business age: Lenders typically require the business to be operational for a minimum period (e.g., six months to two years) before considering an unsecured loan.

Credit history: For traditional business lending financiers (including the big banks and some credit unions), your personal and business credit history may be crucial in their decision-making process when assessing your loan application. A good credit history may enhance your chances of approval, however, for many first-time business owners, without an extensive trading history, a credit check might be performed on their personal details instead.

Business plan: A detailed business plan demonstrating your vision, market analysis, and growth strategies may increase your credibility as a borrower.

Loan amount and term

Loan amount: Unsecured startup business loans in Australia typically range from $5,000 to $500,000, depending on the lender and your business’s financial standing.

Loan term: The loan term may either be short-term or long-term, generally ranging from six months to five years. Your business cash flow and repayment capacity may be considered when determining your loan term.

Interest rates and fees

Interest rates: It is common for unsecured finance to come with a higher interest rate than the interest rate offered with secured finance due to the increased risk for the lender. Rates can vary between lenders, so many business owners conduct due diligence by comparing lenders before applying for business loans.

Fees: Apart from interest rates, lenders may also charge various fees, such as origination fees, application fees, or ongoing account management fees. It’s important to consider all the fees associated with the loan when considering the total cost of the loan.

Good to know: Using a comparison rate when comparing different loan products can be useful to gauge the true cost of a loan as comparison rates

Preparing documents for application

Business financials: Lenders typically require recent financial statements, including profit and loss statements, cash flow statements, and balance sheets.

Tax returns: Personal and business tax returns for the past two to three years are often requested to assess your financial stability.

Legal documents: Prepare any legal documents that you feel will be necessary for the application, such as your business registration and any licences you may hold.

Research lenders and compare offers

Explore your options: A good idea is to conduct thorough research to identify lenders who specialise in unsecured startup business loans. You may like to consider both traditional financial institutions and alternative lenders.

Comparing terms: When researching and comparing offers, consider evaluating interest rates, loan amounts, repayment terms, fees, and any additional features or benefits each lender offers.

Read reviews: Look for reviews and testimonials from other entrepreneurs who have obtained loans from the lenders you are considering. This can provide valuable insights into their reputation and customer service.

Build and improve your creditworthiness

Maintain good credit: Paying your bills on time, avoiding excessive debt, repaying your utilities and other credit accounts on time are all ways that you can help maintain (and even build) your credit rating. You may also like to regularly monitor your credit reports by accessing a free copy of your credit report.

Alternative financing options

There are some alternative forms of financing your startup that can be used in conjunction with, or in place of start-up loans. These include:

Government grants and programs: In Australia, there are several government grants and programs aimed at helping businesses at every stage, including start-up businesses.

Crowdfunding: Crowdfunding platforms may allow you to pitch your business idea and seek financial support from individuals or groups interested in your concept.

Angel investors and venture capital: Venture capitalists are typically business professionals who invest funds into startup companies on behalf of a risk capital firm. Angel investors, on the other hand, are affluent individuals who personally invest their own funds into startup ventures.

woman seeking personal loans or business loans

Can I still access an unsecured business loan if I have a bad credit history?

Without a business credit profile, often, lenders turn to your personal credit history to assess your application for an unsecured business loan. This process can be daunting for aspiring business owners with blemishes on their personal credit record. Thankfully, private lenders are able to work with business owners who have poor credit by assessing the application differently.

What is a private lender?

Private lenders are an alternative business lender that operate outside the traditional lending institutions such as big banks and credit unions. Private lenders are often specialist finance companies, individuals or investment firms that provide funding for businesses.

One of the key differences between private lenders and other lenders is that they are not bound by the same strict and inflexible lending criteria, which generally makes them a better choice for businesses who do not fit traditional lending criteria.

Diverse Funding Solutions is one of Australia’s leading private lending broking specialists, with access to over 200 of Australia’s top private lenders. 

Diverse Funding Solutions can offer unsecured business loans for Aussie startups

At Diverse Funding Solutions, we enjoy working with businesses at all stages of their growth cycle to provide the funding they need for their next step. If you’re a business owner trying to get your business idea off the ground, then you may be pleased to learn that we can provide unsecured business loans to Aussie business owners.

Before applying for unsecured business finance with us, it is essential to establish certain prerequisites:

  1. Your business must possess an Australian Business Number (ABN) or an Australian Company Number (ACN) if it operates as a company.
  2. Your business should be registered for Goods and Services Tax (GST).
  3. Demonstrating a minimum of six months in business and providing evidence of sales revenue will enhance your approval prospects.

Although we may conduct a credit check, it’s not always a necessary step in assessing an unsecured business loan application.

How to get your unsecured business loan underway

Whether for an unsecured business loan or a secured business loan, experience the efficiency and exemplary service offered by Diverse Funding Solutions by reaching out to our team or requesting a free quote today!

We offer fast funding with minimal documentation and maximum understanding of your business endeavours.


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