Choosing the Best Business Loan for Your SME Expansion
A business loan can fund expansion, equipment, or working capital. Understanding repayment obligations is key: loan amount, interest rate, term, frequency, fees, and balloon options all affect cash flow. Use this calculator to estimate your periodic payments and total cost under various scenarios.
FAQ
Q1: Should I choose a loan with a balloon payment?
A balloon payment lowers periodic payments but requires a large lump sum at the end. It can be useful if you expect higher cash flow later or plan to refinance/sell the asset at term end. However, it increases risk if you cannot pay the balloon—you may need to refinance at potentially higher rates or sell assets. Consider your cash flow forecast.
Q2: How do establishment fees affect my loan?
Establishment fees (origination, documentation, application fees) can be added to the loan amount or paid upfront. Adding them increases the principal, resulting in more interest over the life of the loan. Compare loans using APR (annual percentage rate) which includes fees to see true cost.
Q3: What is the typical interest rate for business loans in Australia?
Rates vary widely based on lender (bank vs non-bank), loan type (secured/unsecured), term, and business risk. Secured business loans might range 5-10% p.a.; unsecured loans often 10-20%+ p.a. Always compare the product disclosure statement (PDS) and consider total cost, not just rate.
Important: Use this calculator to model different scenarios. But before applying, review loan terms with your accountant or financial advisor. Ensure you can comfortably service the debt even if revenue declines.