Business Loans

Startup Business Loans: How to Fund Your New Business

Written by:

Angelica Silva


November 30, 2020

Last updated

August 12, 2022

Reading time

5 minutes

Angelica Silva

Angelica Silva is a contributing writer for Oiyo. Over the years, Angelica has worked as a journalist for a range of publications with her work appearing in SBS, Business Insider, and Brown Girl Magazine. She has a Bachelor of Journalism and Arts from the University of Queensland.

In 2020, everyone seems to have a sneaky side hustle or project up their sleeve. Thanks to the conveniences afforded to us by the internet, more people are tapping into the  opportunities found in the digital depths of cyberspace to earn some extra cash.

Being your own boss – for many Aussies, it’s the ultimate dream, and it’s one that thousands take a chance on every year by starting up their own business. According to 2019 figures from the Australian Bureau of Statistics (ABS), there were over 2.3 million actively trading businesses in Australia.

But launching a brand new business doesn’t magically happen overnight. Turning this dream into reality takes hard work, and it doesn’t come cheap either. So what options do startups have when it comes to getting necessary funding? Enter: startup business loans. Oiyo has put together the ultimate guide on how to fund your new business.

What is a startup business?

The term “startup” gets thrown around pretty often, but what exactly does it mean? We know that all businesses start somewhere, so what makes a startup so different? A startup is a newly-formed, fast-growing business that is in the process of developing their product or service. These businesses can be sole traders, partnerships, or organisations with a model that can be rapidly scaled.

Startup founders are considered entrepreneurs, but not as you know them. They’re a new type of inventor – a ‘disruptor’. They create products that don’t currently exist in the market or, they enter an existing market with a modified product that disrupts or changes the industry.

Despite some similarities, a startup is different from a traditional small business in terms of business model, product type, and funding method. Startups tend to specialise more in technology-driven products and are designed for rapid growth. Given these differences, startup business loans can be structured a little differently to traditional business finance options.

What do startups need funding for?

Whether you’re opening a cafe, selling your clothing designs, or starting your own plumbing business – there are lists on lists of costs that startups need to shell out for. While some are obvious, others may come as a surprise to first-time owners. They can include:

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  • Purchasing stock, equipment, or vehicles
  • Hiring staff
  • Marketing, advertising or market research costs
  • Setting up services: phones, electricity, and internet
  • Obtaining licences or permits specific to your industry
  • Paying rent and fitting out new spaces
  • Creating a website

How to compare startup business loans

Deciding which finance is the right fit for your startup is vital, and it all starts with comparing your options. Here are a few points to consider:

How much money do you need to borrow?

The loan you will be offered will be based on the specific details you provide in your application. However, depending on the lender, you may be able to find out the minimum and maximum amounts on offer. This is more likely to be with online and alternative lenders.

How long do you need to repay the loan?

If your business hasn’t exactly taken off yet, it may be difficult to determine how much you’ll have to repay. This is where having a solid business plan comes into effect. Work out an approximate budget and don’t apply for a loan you know you cannot afford to repay.

How long does my business need to be operating to get a business loan?

With all of these costs and questions to consider, how can you go about getting startup business loans?

As with any good news, there’s always more to the story.

Many lenders require businesses to have been in operation for a certain period of time or to be making minimum yearly revenue before they will lend to them. This is because lenders want to be certain your business is on stable footing and that you’ll be able to pay off the loan.

Below are some of the minimum requirements lenders tend to look for:

Business lender Product How long you need to have been operating Minimum yearly revenue
Banjo Loans Business Loan 2 years $500,000
Business Fuel Loans Business Loan 6 months $120,000
Capify Unsecured Small Business Loan 6 months $120,000
GetCapital Flexible Business Loan 9 months $100,000
Lumi Unsecured Business Loan 6 months $50,000
NAB Unsecured Business Loan 12 months No minimum
Max Funding Unsecured Business Loan 6 months $72,000
Moula Business Loan 12 months $60,000
OnDeck Short Term Business Loan 12 months $100,000
Prospa Business Loan 6 months $72,000

Please note, the information shown in the above reflects the current rates offered by these lenders as of November 30, 2020. Products are ranked by alphabetical order only. Ensure you check upfront with your lender to further understand if their product meets your needs. 

How to apply for a business loan as a startup

If you’ve got a baby business and think you might meet the requirements to take out a business loan from a bank or an online lender, there are a few important questions to ask yourself before you apply:

Can you afford a business loan?

Ticking all the boxes to take out a business loan is more of a pre-first step. Above anything else, you first need to find out if it will actually fit into your budget. Work out exactly how much you need to borrow and what you’ll be required to pay back. To help you do this, you’ll need to know the interest rate you’ll be paying. Then, look for repayment calculators online to help you estimate the repayments.

What is the interest rate? Are there other costs involved?

Business loan interest rates can get a bit more complicated. Banks tend to offer interest rates which are calculated on a yearly basis, while many online lenders offer rates which are calculated on a monthly, weekly, or even daily basis.

It also helps to compare other costs and features of each loan, such as application or set up fees, as well as whether the loan is secured or unsecured.

What do you need to apply?

After you’ve compared a range of startup business loans and found the right one for you, it’s time to apply. The time it will take to complete an application and receive the funds in your bank account will vary from lender to lender. When you do get to applying, make sure you’ve got the following essentials so you’re ready to go:

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Business and personal information:

  • Phone number
  • Email address
  • The name of your business
  • Your Australian Business Number (ABN) or Australian Company Number (ACN)

Proof of your financial position: 

  • Bank account statements
  • Any assets you want to secure the loan with, i.e. car, boat. Etc.
  • Tax records

A business plan: 

  • This could be particularly relevant for newer businesses applying for a loan, as some lenders require applicants to provide a business plan with details of how the loan will be used.

What regulations should I be aware of?

Over time, the startup sector has become increasingly regulated. This has made it easier for people to turn their change-making ideas into companies, and for startup founders to get the finance they need. Of course, this has changed some things around startup business loans.

The largest regulatory changes were announced in the Federal Government’s innovation agenda, which detailed various changes to be rolled out in 2016 and beyond:

  • From 1 July 2016 investors who support innovative startups will receive a 20% non-refundable tax offset on investments capped at $200,000 per year, per investor.
  • From 1 July 2016 investors who support innovative startups will receive a 10-year capital gains tax exemption for investments held for three years.
  • Already in place are changes to crowdsourced equity funding (CSEF) schemes to allow entrepreneurs to raise up to $5 million per year in funds from a large number of individuals in return for equity in their company.
  • Companies that went public to access CSEF have a five-year exemption from normal reporting and exemption requirements.
  • From 1 July 2016 partners in a new Early Stage Venture Capital Limited Partnership (ESVCLP) will receive a 10% non-refundable tax offset on capital invested during the year. Funding size will also be increased from $100 million to $200 million.

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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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