What is a business loan?
A business loan is a sum of money leant to your business. You can choose to pay fixed or variable interest rates and select a frequency of repayments that works best for you – such as monthly, quarterly or yearly.
The regular repayment amount is typically worked out over 1 to 30 years; and you can use different types of security – such as cash, residential property, commercial property or business assets – to ‘secure’ your loan. If you would prefer not to put up security against a loan, you could consider an unsecured business loan, but these tend to be for smaller amounts.
Who can apply?
- A business entity domiciled in Australia; or an individual 18 years and above or strata corporation domiciled in Australia and requires the funding for business or investment purposes other than investment in residential property.
- You need to be an existing Westpac business customer to apply for an unsecured business loan. Your business will also need to meet these requirements.
Why choose a business loan?
A business loan may suit your business if you need funding for a business acquisition, start-up costs, capital investment, property acquisition or development, or refinancing other lending.
Benefits for your business
- Funds to help you invest and grow
- Option of secured or unsecured
- Flexible repayment options - choose what’s best for you
Understanding your repayment options
Depending on whether your loan is secured or unsecured, you may have a choice of a fixed or variable rate. You can make interest only4 or principal and interest repayments.
- Make extra payments, which could reduce interest paid over the life of the loan
- Option to swap between interest only or principal and interest repayments
- Redraw allows you to make extra payments and access these funds later.
Rather than choosing one or the other, you can fix part of your loan - and keep the other part variable.
The difference between a business loan, credit card and overdraft
Loans, credit cards and overdrafts can all be good ways to support your cash flow, fund purchases or invest in business assets. However, having a good understanding of how they differ could help you decide the best type of loan for your business needs.
Frequently asked questions
Conditional offers are calculated periodically based on your financial information at a certain point in time, if your financial situation changes this may affect your borrowing power meaning that you may no longer have a conditional approval.
If you choose to offer security for your business loan, you will typically pay a lower interest rate than if you choose the unsecured business loan option. Bear in mind that the interest rate is lower because we secure the loan using a pre-agreed asset, which we can recover against if you are unable to repay the loan.
Some important things to consider before applying:
Depending on your circumstances, business loans can be unsecured or require security in the form of residential property, commercial property, or other types of security. A guarantee will also be required by company directors for corporate borrowers.
All borrowers, owners, directors, and guarantors must have clear credit records. All statutory payments and ATO liabilities need to be up to date and not under arrangement.
Banking and borrowing history
Existing bank accounts and lending products must be within their approved limits.
Your business must be registered in Australia.
The term of your business loan will vary depending on security offered (you may swap if your situation changes):
- Loan term up to 30 years when residential property used as security
- Loan term up to 25 years when commercial or rural property used as security
- Loan term up to 5 years when unsecured (guarantee may be required).
Yes, you can choose your repayment frequency from:
- Annually (principal only).
Additional fees may apply if you choose an interest charge cycle other than monthly or where repayments are interest in advance.
If you already bank with us, we won’t need your individual ID again if we already have it on file.
If you are new to the bank, we will need to see ID, such as your driver's licence or passport. We may also need to see your business registration documents.
Most businesses will need to show:
- Annual financial statements or a copy of tax returns
- Interim financial statements, as required
- A copy of the latest full tax portal report.
In some cases, we may need more information, such as:
- Business Activity Statements or cash flow statements
- Recent management information appropriate to the risk and complexity of the loan (e.g. cash flow forecasts, management accounts, working asset statement etc.)
- Projected financial information.
Proof of individual income
We may also want to know your personal income if you are a director and/or shareholder of a company. We’re likely to ask you for your most recent individual tax returns.
If you earn other income unrelated to your business, or not shown in your tax return, you may want to provide this information as well. For example, you could show income from a rental property if you have one.
We will want to know your expenses to ensure the loan repayments can be paid. Expenses include things like bills, living expenses, current loan repayments and credit card limits. We may also require financial statements that detail business expenses to help us determine whether your business can meet your future repayments.
We’ll ask you three important questions when assessing your business loan application.
1. Can you afford the business loan?
We’ll need your financials for the last 2 years. This includes:
- balance sheets
- profit and loss
- tax returns
This information helps us determine whether your business can meet future loan repayments.
2. Can you provide security for your loan?
Unless you’re applying for an unsecured loan, you’ll usually need to secure your business loan with an asset or a form of guarantee. Residential, commercial or rural property is often used as security, but it depends on the type of business.
3. Will you be able to continue making repayments?
We’ll evaluate your business by talking to you about:
- your future plans
- competitor activity
- your suppliers and business contracts.
This helps us determine whether your business will have enough revenue to meet your future repayments.
If you’re starting a new business, you’ll need to provide a detailed business plan with profit and loss forecasting to support your business loan application.
If you’re buying an existing business you’ll need to show profit and loss statements for the last 2 years.
Maintain accurate, up to date financials
This provides a clear understanding of your business income and whether you can afford the business loan.
Make sure you have enough money to cover costs
If you have an existing business loan try to make extra repayments consistently if you can and don’t overdraw your account.
Maintain a good credit history by paying off your debts on time
All credit activity (personal and business) is kept on file for 5 years. This includes your loan details, repayments, overdue accounts. Lenders use this information to assess whether you’re credit worthy.
- Residential property
- Commercial property
- Business assets.
To increase your borrowing power, many business loans are secured by an asset – usually property. The amount of equity available in the property helps to determine how much you can borrow.
Generally, we'll lend you up to:
- 80% of a residential property value
- 65% of a commercial property value
- 70% of a rural property value.
Whatever asset you use to secure your business loan, you can still sell it if you want to during the loan term. In some cases this may require our agreement.
The following options are available depending on your situation.
Sell your asset and repay the business loan
If you choose to sell your asset, we may use the proceeds of the sale to repay your business loan. With any money left over will given back to you.
Offer another asset to secure the business loan
If you’re buying a new property or already have another property you can use as security, we may agree to use these to replace the existing security. We’ll usually need you to fill out some documents to make this change.
Sell your asset and use the cash to secure the business loan
If you want to sell your property but haven’t found another property to buy, we may hold the money from the sale of your property. This will secure the business loan until you buy another property or asset.
You’ll usually need to provide us with some documentation for this arrangement.
When you decide to sell your asset, it’s important to notify us first. We’ll need to let you know what we require to allow the sale to proceed smoothly.
When you request to take out a new business loan, you may be asked for a guarantee. A guarantee makes sure the business loan will be repaid.
There are 2 types of guarantees:
1. First party guarantee
You guarantee the loan by providing security from an asset that you own, usually a property. This is the most common type of guarantee.
2. Third party guarantee
In some cases you’ll need someone else (a person or entity that is not you - the borrower) to guarantee your business loan. They’ll need to provide security from one of their assets.
If you can’t make your business loan repayments, we will ask the guarantor to pay them for you. In some cases, if the repayments aren’t being made, the guarantor may need to sell their asset to cover the remaining debt or offer further security.
Things you should know
Credit criteria, fees, charges, terms and conditions apply. Director's guarantee may be required. Establishment fees apply.
1. Rates vary depending on a number of factors, such as loan team and the type of security provided.
2. Eligibility, credit criteria and type of security determine how much you can borrow.
3. Charged at the beginning of the month. Other fees may apply.
4. Interest only payments are subject to credit criteria.
Extra eligibility requirements for unsecured business loans
To be eligible you need to be a Westpac customer and your business will:
- Have traded for at least 12 months with a valid ABN or ACN
- Be registered for GST
- Turnover more than $75K annually
- Operating as a sole trader (aged 18 years or over) or a sole director company (where the sole director is also the sole company secretary). For company borrowers, the sole director must supply a director's guarantee
- Be a tax resident of Australia, that is based, registered, and operating in Australia
- Only use the finance for business purposes and will not be used to finance other lending, start a business, fund a property development, or buy residential property
- Have less than $1m in business lending with Westpac
- Have ATO payments, loan repayments and employee entitlements (including super) up to date.