While most homeowners in Australia with a decent credit score know that an average home loan should be somewhere between 3 and 4 percent, it is a bit more difficult to settle on an acceptable business loan rate.
Unfortunately, many banks and financial institutions will often dramatically increase the interest rates for business loans, especially for small startups or companies experiencing temporary financial setbacks. While there are online tools that will help you search for the best business loan rates and ways to discover decent business loans even with bad credit, there are still challenges that need to be faced.
When it comes to large business loans, common sense would tell us that the larger the loan and the longer the loan term, the lower the interest rate should be. If your business is considering expanding product offerings, fulfilling large client orders, investing in major fixed assets, or need a loan for some other major business investment, below we offer some suggestions for how to find the best interest rate for large business and commercial loans.
What is APR?
Before we look at the best business loan rates in Australia, it is important to define one of the most often misunderstood terms when it comes to loans. APR stands for annual percentage rate, and will help you determine the amount of interest on your loan amount that you will pay annually.
For example, for a $10,000 dollar small business loan with an 8 percent APR, you could expect to pay $800 dollar annually in interest. When searching for business loans, either large or small, it almost always in your best interest to search for loans with the lowest APR as this translates into lower monthly payments.
Current Business Loan Rates in Australia
Unlike home mortgages, business loan rates tend to fluctuate a bit more. Currently, the average business loan rate in Australia is anywhere between 5 and 7 percent APR. While a variable rate small business development loan averages around 6.43 percent, an overdraft business loan is set at 7.25 percent for variable rate.
In terms of fixed rate loans for businesses, the average loan rate varies from 5.3 percent for a one year loan to 5.83 percent for a loan with a five year term. Obviously these rates will vary depending on whether they are secured or unsecured and according to the financial standing of your business.
According to National Australia Bank, the base rate for all business finance currently sits at 8.77 percent while prime business loans might be as low as 5.19 percent.
When searching for financing for your large business loan request, government banks also offer useful information. While there are several small business grants available through the government, the Reserve Bank of Australia offers monthly indicator lending rates. As of July 2018, the indicator lending rate for small business loans stood at 6.45 percent.
Finally, for multi-million dollar business loans, you might also consider a bank bill business loan. If you need a loan over 5 million dollars, you might be eligible for wholesale pricing which is based on the rate at which the bank lends money. Currently, bank bill business loans are between 3.5 and 4.0 percent.
When you do finally settle on a loan, it is important to understand how to calculate the payments. There are several small business loan calculators online that will help you to calculate your business loan payment schedule.
With a bit of research and dedication, finding a large business loan with a competitive interest rate is a great way to help your business meet its growth goals.