Bad Credit Business Loans in Australia
Running a business most certainly comes with its ups and downs. While there may be times when your business volume is through the roof and profitability continues to increase, there are other times when the economy is down, competitors are on your heals, and it is simply not easy to stay away from the bureaucratic red tape. Unfortunately, negative numbers for small business owners usually means that the majority of financial institutions will ignore you or turn you away when applying for business loans.
A recent report by the Australian Bureau of Statistics (ABS) found that in 2015-2016, over 35% of all businesses reported increases in sales from goods and services provided by their company. This shows an upward trend in the Australian economy and certainly makes it a great time to expand your current business projections. That same ABS report, however, determined that the lack of access to additional business operating funds was a major barrier to the development and launch of new and innovative goods and services.
If your business or brand has suffered through a rough period and has developed a bad credit score, that doesn’t mean that you are condemned to suffering through vulnerable economic times. There are several ways to find bad credit business loans which might very well give your company the boost it needs to increase your long-term productivity and profitability. In this article we will review a few of the things you need to know related to bad credit and unsecured business loans in Australia.
Know Your Rights
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Unfortunately, there are several predatory lenders out there whose sole ambition is to take advantage of individuals and businesses whose credit score makes them unable to secure loans from most banks and financial institutions. These lending agencies will often demand high interest rates and also include several unfair and dishonest terms in the contracts when offering a loan.
The Australian Consumer Law, however, has special regulations to specifically protect small business owners from unfair contract terms. While there are several statutes to this legislation, this consumer law specifically protects small businesses with less than 20 employees from contracts (including business loan contracts) where one party (the lender) has the exclusive ability to vary the terms of the contract. Many unfair lending practices will arbitrarily raise interest rates as they please and often without notice. Knowing and understanding your rights under the Australian Consumer Law is the first and most important step to securing an unsecured or bad credit business loan that will benefit your company.
There are literally hundreds of individual lenders and lending companies who operate illegally both in Australia and overseas. Through often-illegal channels such as breaches in online data privacy, these lending agencies may discover your current credit problems and contact you to offer you a business loan with seemingly fantastic loan terms.
Before agreeing to any business loan, it is essential to find out what companies are legitimate lenders and which companies have a history of scams or abusive lending practices. You can find a list of unlicensed companies and individual lenders who have a history of unfair lending practices at the Australian Securities and Investment Commission website.
Find the right Lender
You might be contacted by scammy lenders that sometimes aren’t listed on the securities commission website. You might not be able to find out if they are good or not. That’s where trusted advisors like ebroker can help you find the right business loan. They know the market and understand that sometimes good businesses have bad credit. They have a wealth of knowledge with Australian bad credit business loans and can provide insights on the best way to get funds.
Read the Fine Print
Before agreeing to any bad credit or unsecured business loan, you should always take the time to read the fine print on the loan instrument that is offered to you. This includes understanding the loan term, the interest rate and type of interest (fixed or variable), hidden fees and costs, and the taxes and security associated with the loan.
If you feel that you need working capital along with your business loan while your business is re-establishing itself, you should ask about the possibility of including an overdraft protection clause into your loan. If your loan does not come with this overdraft facility, unauthorized overdrafts will likely result in hefty fines.
Ability to Refinance
Lastly, when searching for a bad credit or unsecured business loan, you should search for lenders who will ideally allow you to refinance your loan once your credit improves and your business becomes more stable and profitable. Even the best lending agencies will extend interest rates that are considerably higher to businesses with low credit scores. However, if these lending agencies are truly interested in creating a long-term relationship, they should allow you to refinance the conditions on your loan once your credit has improved.
To find the best terms for a business loan, you need to take the time to shop around. Most companies should offer you free upfront quotes and it’s always a good idea to get as many quotes as possible to compare the best rates, terms, and conditions. While you could hire a financial advisor to help you find the best business loan available to you, following the advice offered by the Australian Department of Industry, Innovation, and Science should allow you to find the best business loan for your individual needs.