Business Loans

A business loan is a lump sum of money lent to your business. The loan amount, loan term (the period you repay the loan), interest rate, interest rate type (fixed or variable), fees, and security can vary.  

Potential benefits include:

1. A defined loan term 
2. Flexibility of fixed or variable interest rates
3. Various repayment options (like principal and interest or interest only)

Potential disadvantages include:

1. The loan must be paid back in full in the agreed term
2. There’s no redraw option for fixed loans
3. The loan account can’t be used as a transaction account
4. Security is often preferred and linked to the loan.

Business loan refinancing, refinance business loan, competitive loan rates, business loan options, expert brokers 

Yes, you can refinance a business loan to ensure your rate remains competitive and the loan continues to meet your needs. However, refinancing may not suit every business, and there could be costs involved. Expert business brokers at VOXFIN can guide you through all available options to help you make an informed decision.

A business overdraft is a type of line of credit that is typically connected to your business transaction account. It allows you to access funds when you need to make payments or cover expenses, even if you do not have enough money in your account. Any funds you deposit into the account reduce the overdraft amount, as long as it remains within the approved limit. Interest is usually charged only on the amount of money that you use, not on the entire overdraft limit. 

Business overdrafts are commonly used to ease the pressure on your cash flow by providing funds to cover various expenses, such as purchasing stock, paying invoices, and meeting wage payments, until you receive payments from your customers.

Potential Benefits:

1. Does not have an expiry date
2. Interest is only charged on the amount used
3. Can be linked to your business transaction account
4. Suitable for medium to long-term seasonal cash flow requirements, such as busy stock purchase periods or the need for additional staff during holiday periods

Potential Disadvantages:

1. Interest rates are typically higher than those for business loans
2. Variable interest rates apply to the borrowed amounts
3. Lacks flexibility in repayment types, such as interest-only options
4. Does not have a defined repayment schedule

A finance lease, also known as a lease, enables you to use an asset such as a car, machinery, or equipment for an agreed period of time. The lender purchases the asset at your request and rents it to you for a fixed period (the term of the contract). At the end of the lease period, you return the vehicle or equipment and make a residual value or balloon payment. 

Pros and cons of a finance lease:

1. You don’t own the vehicle under your personal or business name; the bank owns the asset
2. The repayments may be tax-deductible

A hire purchase arrangement enables your business to acquire assets over an agreed-upon period. The lender purchases the asset on your behalf and allows your business to utilise it in exchange for regular payments. Upon completion of all payments, including the final one, your business becomes the owner of the asset.

Here are some of the advantages and disadvantages of a commercial hire purchase:

1. Ownership of the asset is acquired only at the end of the term
2. Both the interest on the financing and the depreciation of the asset might be eligible for tax deductions

A chattel mortgage, also known as a goods loan, is a popular form of business asset finance used to purchase vehicles and equipment. With a chattel mortgage, your business buys and owns the asset from the beginning of the loan term and makes regular repayments for an agreed-upon period until the loan is fully repaid.

Here are some advantages and disadvantages of a chattel mortgage (goods loan):

1. You have ownership of the asset/goods from the beginning of the term. If you want to upgrade to a new asset or good, you will have to sell it yourself
2. The interest on the finance and depreciation of the asset may be tax-deductible

Invoice finance, also known as accounts receivable finance, is a quick way to access cash in order to pay outstanding invoices. With this option, you can typically access up to 85% of the value of your approved unpaid invoices. Here are some of the pros and cons of invoice finance:

Pros:

1. Helps to support cash flow
2. Allows you to “sell” outstanding invoices that aren’t due yet to the bank in exchange for cash
3. Access up to 85% of the value of the invoice in cash
4. No security is needed as the invoice acts as a security
5. Funds are usually received within 24 business hours.

Cons:

1. You don’t receive the full value of the invoice that you have issued

Interest is typically calculated on an annual basis but is paid out monthly. 

For instance, if you borrow $70,000 at an interest rate of 7%, you can calculate the annual interest using the simple interest formula: $70,000 x (7/100) = $4,900. To estimate the monthly interest, divide the annual interest by 365 and then multiply the result by the number of days in the month. It’s important to note that interest rates can vary based on several factors.