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​Small Business Financing Options and their Interest Rates in Australia

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The success or failure of the business usually depends on how prepared the business owner is with respect to the required resources. He must have the business plan, the necessary licensing requirements, the payment of required fees, the marketing and sales plan, and the product or service which the owner intends to use as an integral part of his business. However, completion of all these requirements will not guarantee the success of the business if financing, the most important element of a business, is missing.

Established companies do not have problems with financing, giving them more opportunities to provide more goods or services or to tap new markets. Small businesses, however, will always have a problem with financing, considering that it has not yet established a name in the competition. No matter how good the small business’ offer is, if it fails to introduce it to the general population, it will never prosper.

To address these issues faced by these owners, small business financing options and their interest rates in Australia are provided by different companies. This is to assist small business owners to have an opportunity to join the competition in the free market. This is also to let these owners exhibit their expertise and creativeness which may give rise to additional niche markets. The small business financing options and their interest rates in Australia are the following:

1. Investment angels

Investment angels, also known as business angels, are individuals or corporations that use their money solely for investing. These are people or companies that are clueless on what to do with their money. They are guaranteed to have large amounts of money, ready to be used as a foundation for starting a business.

Using business angels, however, is a very difficult task because before they put their money, they have to be fully convinced that their money will be used only for the business. They have to get the assurance that the money that they will give will be used for the development and improvement of the business and its products. Some business angels do not require anymore that they receive a share in the profits of the business, but most of them usually require it.

Business angels are an effective small business financing options and their interest rates in Australia depend on the agreement between the entrepreneur and the investor. Because they take part of the risk in developing their current business or starting a new venture, using business angels ensures quick making of investment decisions.

2. Equity financing

Equity financing is a form of financing option whereby the entrepreneur offers to another a stake or a share of profits in the business in exchange for the latter’s money. Equity financing is considered to be one of the easiest methods of financing because money invested is not required to be paid immediately. Since the money becomes a part of the capital of the business, the investor becomes a stakeholder of the business such that he becomes interested with its management and affairs.

Equity financing is one of the effective small business financing options and their interest rates in Australia are not applicable. This means that no interest is needed to be paid by the entrepreneur because the interest that he gets takes the form of the control over the operations of the business.

3. Loans

Using loans are also one of the small business financing options and their interest rates in Australia depend on the type of loan obtained. Regardless of the type, loans must always be accompanied by a security so that financial institutions will never have a hard time assessing the application.

Home loan is one of the small business financing options and their interest rates in Australia ranges from 4.29% per annum to 4.45% per annum, depending on the type of financial product availed by the small business owners. Mortgage loans, however, charge an interest rate of 4.5% per annum.

4. Credit cards

Credit cards are the widely used financing options for small business owners. Most of the time, owners are looking for a credit card that will provide them the optimal value for their money. Before getting one, an entrepreneur must be knowledgeable about it being one of the small business financing options and their interest rates in Australia will be of utmost important to him to avoid future liability for non-payment of obligations.

Most companies provide for cheap credit cards designed for small business owners so that they will be able to start their own business. Cheap credit cards are small business financing options and their interest rates in Australia ranges from 10% to 12% per annum. However, certain factors must still be considered before one gets a credit card. For instance, some companies utilize the offering of a lower interest rate during its introductory period. Some require the payment in advance of certain fees. These factors are very important to consider because in choosing a credit card, only the small business owner will be able to know the best offer to take.

Knowing the small business financing options and their interest rates in Australia will give the business owner an opportunity to assess his capacity and qualifications. It will give him an idea of the best financing option to choose and the proper amount of interest charges to pay. Also, teaching these gives him an opportunity to match established businesses in terms of competitiveness in the market.

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