With a substantial injection of cash into the business bank account you can finally open the door to taking any current or planned business endeavours to the next level, backed by a steady flow of financial support that’s guaranteed to be in place as and when you need it, for an extended period of time.
As you’ve no doubt experienced, or witnessed when following the trajectory of other businesses within your industry, the power of positioning a business this way is priceless. Particularly in the current climate when staying relevant and being seen and heard in a crowded marketplace are the pivotal deciding factors in whether a business sinks or flies.
At Lumi we advocate for rigorous research, and a thorough analysis of all the options available to you. First, we suggest you take a step back and consider the entire process of successfully procuring a commercial loan, from the initial decision to look into it in more detail, to the funds landing in your account and the completion of the first transaction this funding enables.
Ask yourself key questions - about the loan amount required, the length of the loan that best fits with your plans and projections, where the funds will be allocated, and the desired result of this spending.
You may find it gives clarity to write this information down, and to dig a little deeper into what a commercial loan arrangement would look like for your business, in both the short and long term.
In response to the many questions we see raised about commercial loans, and how often we see them answered incorrectly, we’ve laid out a detailed roadmap of the decision making journey below. This will leave you in no doubt as to the right next steps for your business, and the appropriate finance solution to fulfil the plans you’ve made for its future growth.
When you strip away the buzzwords, a commercial loan is simply a funding arrangement between a lender and a business. It would typically be used to cover major expenses and financial costs, and can be either short or long term, secured or unsecured, depending on the circumstances of the business and the terms of the final loan agreement.
One of the benefits of longer length commercial loan repayment periods, and the often significantly higher loan amounts associated with them, are more affordable interest rates - compared to other more short term finance options available to you.
When compared with other options for boosting cash flow and lifting a business to the next level, a commercial loan can give access to a large lump sum that’s readily available once the loan application has been approved.
This means access to critical funding, with a loan term that can span anywhere between a few months to years. An extended repayment period that allows for the debt to be repaid while the business evolves and grows concurrently, in tandem with the repayment plan.
In finance the terms secured and unsecured refer to lenders’ requirement for collateral to be put against a commercial loan, offsetting the potential risk of missed repayments or defaulting on the loan.
Unsecured loans can be obtained without providing collateral. Meaning without offering up assets as insurance for repayments that will be made on a loan. Instead, unsecured business loans are approved based purely on the borrower's creditworthiness, which eliminates the possibility of lenders seeking repayment by calling in your assets. At Lumi this option is available for loans of up to $150,000.
Beyond that amount, secured loans typically require that significant assets are used to procure and ‘secure’ the loan. Traditionally the family home and/or vehicle, or property and equipment connected to the business have been used for this purpose. More recently a degree of flexibility has meant that savings, unpaid invoices, inventory and other similar assets have also been deemed suitable collateral in some cases. The benefit for borrowers is that providing collateral up front often means a lower interest rate can be approved for the repayment period.
For a clearer picture we suggest you try out the Lumi commercial loan repayment & affordability calculator to get a real time snapshot of exactly what each finance arrangement would look like for your business.
There’s an ever increasing number of finance options available to businesses looking to secure funding and whether you’re a kid in a candy shop or a deer in the headlights, information is important and knowledge gives you the power to choose a winning finance strategy for the good of your business.
A larger lump sum over a longer repayment period. This sum will include interest and be repaid in regular installments over a set period of time ranging anywhere from 12 months up to 30 years. Amounts of $250,000 to $50,000,000 can typically be borrowed when secured with valuable assets as collateral, from a traditional bricks and mortar bank or modern day online lender.
A great solution for significant expenses like new premises, or a top tier recruitment to start building the best possible team.
A smaller lump sum over a shorter repayment period. Terms usually last for 3 to 36 months and at Lumi are paid off at an average of 6 months. Unlike their larger counterparts the loans can either be secured or unsecured, although this is often countered with higher interest rates. At Lumi, we specialise in short term business finance ranging from $5,000 to $300,000.
A short term commercial loan is a quick, flexible way to get cash flow into the business for initiatives like the purchase of new equipment.
Business line of credit finance is structured similar to that of a credit card. It delivers easy and ongoing access to a pre approved amount of funds, as and when you need them. Interest is only charged on the amount owing at any given time, and not the full agreed amount, which can be set in place for a fixed period or extended depending on the terms of the loan.
A great revolving finance option for businesses in need of smaller injections of cash over a set period of time or to reduce stress during the low season for businesses where trade periodically dips.
With Lumi’s Business Line of Credit you can boost your cash flow with ongoing funds by getting flexible access to revolving capital from $5,000 - $300,000.
When you have invoices coming through and payments due from customers invoice financing allows you to borrow funds for the business against these amounts. It’s a more viable alternative to using personal funds or credit cards to cover the gap in cash flow when invoices are paid late and means that business owners aren’t stressed, struggling, or missing out on valuable opportunities to grow the business as they follow up customers for payments.
A more professional way of handling debt for business owners who need to pay employee wages and their own supplier invoices on time regardless of when their invoices are paid.
This is very specific financing designed purely for the purchase of equipment that can be used within the business at the commencement of the loan agreement. Regular payments must be made towards covering the debt and once it’s paid in full the business retains full ownership of the financed equipment. Existing equipment can also be used as collateral to secure the loan making this accessible finance for businesses with the need to make major upgrades but lacking the funds to do so without a loan.
A great finance solution for replacing older equipment as well as purchasing brand new items, without applying pressure to existing financial commitments.
This finance option is specifically designed for retailers. Businesses like clothes and homewares shops, or cafés and restaurants, who consistently complete credit card and EFTPOS transactions can borrow funds fast, and repay them through an ongoing and agreed percentage of future credit card and EFTPOS payments.
A novel approach to finance for a segment of the business owner community that often requires additional funds to keep employing, marketing and operating while covering existing debts and unforeseen costs.
If you have a business bank account you’re no doubt aware of this facility, and the option to potentially open a line of credit that’s attached to it. An approved limit acts as an extension of funds in the account and transactions can be made online or using the account’s associated debit card. Business overdrafts can be unsecured or secured by putting up collateral like property or vehicles to cover the risk of potentially missed payments.
A simple way of leveraging more funds than you may have in your account at the exact moment you need them, in order to operate or further grow the business.
Low interest is a key benefit here, and it comes courtesy of short term loans of micro amounts of money, perfect for boosting the cash flow of businesses with low capital requirements. With loan amounts typically ranging from $100 to $50,000 this micro finance option is typically unsecured, and set up in such a way that self-employed individuals and new start-ups are eligible for approved funding. Plus it’s a workable solution for small businesses with fewer employees.
A finance launchpad that’s particularly effective for small businesses looking to cover start-up costs such as new stock, office equipment, or marketing activity.
A commercial loan is an effective, industry standard way to cover any operational or unexpected costs associated with running a business. Better than leaning on your own personal funds, commercial loan finance allows for a significant amount to be borrowed, with repayment terms that are structured to work with you and adapt to your requirements as a business owner.
Ongoing operational costs that might necessitate a commercial loan include purchasing new stock, property, vehicles or machinery for the business. Whereas unforeseen operational costs tend to arise in the form of tax bills, regulatory hurdles, opportunities to grow the business and, particularly in the context of 2020 and the global pandemic, necessary tactics and acquisitions to pivot, maintain, stay afloat and thrive.
If your business is established and in a position to make a strong case for funding in a commercial loan application, the benefits of affordable interest rates and flexible repayment cycles discussed above could be a great fit with what you have planned long term for the business.
With your in depth research of the various loan arrangements available to you now complete, the logical next step is to scope out the requirements for submitting a comprehensive and successful application.
The good news is: the old school of thought that applying for a commercial loan requires reams of paperwork and a stressful search for countless supporting documents is now defunct.
At Lumi the process is simple, accessible and fast. Accessible because of the ability to apply online, then edit and update that application as necessary, is game changing tech for potentially overwhelmed business owners striving for less tasks to complete, not more. Fast because we provide you with an application outcome within a few hours and funding on the same business day is also possible.
We’re proud to have designed a commercial loan application process that saves time - and therefore money - which can both be better spent on initiatives that support the growth of the business.
If you’re ready to apply for a commercial loan it’s now time to pull together the supporting documents that will allow you to present your application in the best possible light. At Lumi these include:
So, now that you’ve read everything you need to know about getting a commercial loan for your business, let’s get you on the road to taking that business to the next level.