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Small Business Loans: What You Need to Know Before You Apply

Why get a small business loan?

Small business loans otherwise referred to as micro business loans can help you take your operations to the next level, whether it’s purchasing additional inventory, funding growth, or helping to manage cash flow. There are several different kinds of business loans available from a range of creditors and traditional lenders. Understanding exactly what you want to get out of your loan will help you work out which loan may best suit your needs.

Small Business Loans

At Nifty, we don’t provide small business loans in Australia. We can, however, provide personal loans for self-employed Aussies if their income is paid into a personal account. In this article, we’ll run through everything you need to consider before applying for a business loan and any other finance options we may be able to provide you with.

What is the difference between secured and unsecured small business loans?

The difference between secured and unsecured business loans is the guarantee required. If a business loan is ‘secured’ then it requires you to have an asset, whether that’s business or personal, to attach to the loan. Unsecured small business loans Australia do not require an asset.  

So, if you’ve ever wondered ‘can you get a small business loan without collateral?’ – the answer is, yes! It is important to remember, however, that unsecured business loans tend to have lower borrowing amounts and higher rates due to their increased risk. 

How do you qualify for a small business loan?

When you apply for a small business loan, your business loan eligibility will be evaluated on a range of criteria set out by the lender. Eligibility requirements for small business loans will vary between lenders, yet some common factors they will consider include:

  1. The business’ time in the industry
  2. Minimum revenue earned
  3. Your personal credit score
  4. The company credit record
  5. Any existing tax debts (if applicable)

While you can never know for sure whether your business will be approved, you can improve your eligibility by ensuring you’re performing well in the areas above. 

Are small business loans hard to get?

Getting approved for a small business loan is usually more difficult than qualifying for personal finance. Traditional lenders, like banks, have much stricter criteria for businesses to meet. Some of the most common reasons for rejection include a lack of security, a bad credit history, business inexperience or a week business model. As a result, it’s crucial that small business owners take the time to adequately prepare before applying for finance so they can give their business a better chance at approval.

How do I get a small business loan?

You can get a small business loan online from private lenders or with traditional creditors, like a bank. All lenders will have eligibility requirements that both you and your business will need to meet. You will most likely need to supply a range of documents as well, to illustrate your business’ current financial circumstances. Determining which short-term business loan is right for you will depend on how much you need to borrow and for what purpose. 

Are small business loans a good idea?

A loan could help your small business to grow, but there are plenty of mistakes you’ll want to avoid when applying for finance. In some cases, small business loans can help provide the financial boost your company needs to go to the next level. In other cases, a loan may just place your business in more debt. It is important to carefully consider all your options before submitting an application. 

Ultimately, the Nifty Loans team are not financial advisors. When deciding whether you should apply for a small business loan you should speak with a professional advisor. The Australian government also has plenty of free resources on their Business website to assist you with seeking business finance.

What finance options are available for new businesses?

There is a range of small business loans startup available for new businesses. In general, business finance can be split into two main categories:

  • Debt finance – when you borrow money from a lender for the business, e.g. a bank loan.
  • Equity finance – when you receive money from an individual in exchange for them owning a part of the business, e.g. having shareholders.

If you’re looking for small business startup loans in Australia, they will likely fall into one of the above two categories. You can also access funding for new business ventures via crowdfunding and government grants. With the rise of crowdfunding sites like Kickstarter, you can get financial backing for your business from friends, family, and strangers. This type of crowdfunding is different from most equity finance as you don’t have to give backers a direct share in the business. 

Alternatively, you may be eligible for government grants, depending on your business. That being said, most government grants are not typically for starting up a business. 

Can you get a small business loan with bad credit?

In short, yes. It can be difficult, however, for business owners with a bad credit history to get a traditional bank loan. Alternative lenders may have a more lenient outlook on credit history, depending on their eligibility criteria. Either way, lenders will generally look at both the personal credit history of the company directors as well as the company’s own credit file. So, we suggest you request a copy of your credit file before applying for a small business loan.

You can find out more about credit scores and reports on the MoneySmart website.

5 Things You Should Do Before Applying

Before you apply, there are a few things you should do to make sure you’re adequately prepared. We’ve broken it down into 5 basic steps:

1. Determine what you need the money for

The reason behind why you need to borrow cash is the first step in figuring out which loan could be right for you. It’s likely that this will be one of the first questions a lender will ask. Some of the most common reasons cited for small business loans include:

  • Managing cash flow shortages
  • Funding business growth or development
  • Purchasing new vehicles or equipment 

Determining how much you need to borrow is also an important part of this step. If you’re looking to invest then it’s easy enough to figure out how much you’ll need to borrow. Yet, borrowing to cover cash flow shortfalls can be a little more complicated. You will need to take a good look at your revenue and expenses to determine how much money you will need to borrow

2. Calculate what you can afford to pay

Taking on additional debt can be risky for any business. Before you discuss repayment terms or amounts with a lender, you should work out how much you can truly afford to repay each month. Take a look at your business’ past financials and cash flow forecasts. How much wiggle room is there? The last thing you want to do is take on more debt than your business will be able to handle.

3. Decide between secured or unsecured

There are pros and cons to both secured and unsecured small business loans. How much you need to borrow will undoubtedly have a big say in which loan type you choose. In the table below are some other factors you may want to keep in mind when weighing up your options. 

Secured Business Loans Unsecured Business Loans
You offer an asset for the loan, such as property; The interest rate will usually be lower than unsecured; The lender may sell your asset if you’re unable to repay the loan. No asset is offered; The interest rate is usually higher; It can sometimes be more difficult to be approved for an unsecured loan.

4. Research your options

There are so many different factors you need to consider when determining the best short term business loan for you. Aside from the amount and security, you should also look into which interest rate you’d prefer and what fees may be charged. As with other loans, you’ll usually have a choice between a fixed or variable interest rate. 

A variable-rate might suit you if you’re confident you can repay the loan even if the interest increases. A fixed-rate will be better for you if you want more certainty with how much your repayments will be. A fixed-rate could help you to manage your cash flow. 

In terms of fees and charges, small business loans may have the following additional costs for you to consider as well:

  • Application fees
  • Ongoing monthly fees
  • Early repayment fees
  • Exit fees
  • Valuation fees (if your loan is secured)

5. Speak to an expert

When you apply for business loans, whether it’s through a lender or a broker, it’s important to be prepared. You will need to present yourself and your business in the best possible light to have the best chance of successfully finding funding. It is important to speak to a financial advisor for help finding the best business loan for your individual financial situation.

How Nifty could help

Nifty is the online lender giving Aussies a fair go when it comes to personal finance. Unfortunately, that means we do not offer small business loans. We can, however, provide personal loans to self-employed applicants if their income is paid into a personal account. 

With Nifty, you can apply for fast personal loans between $300 to $5,000 to cover a range of private expenses. Our dedication to 100% transparency means we will never sting you with any unwanted fees or charges. Instead, we’ll do our best to match you with the best loan product for your individual financial circumstances. Nifty is 100% online, that means you can apply for a personal loan anywhere in Australia – at any time! All you need is a device and a good internet connection to get started.


Find out more

At the end of the day, it is important to remember that Nifty is not a financial advisor. For more information on small business loans, you should refer to appropriate financial experts. 

However, if you’d like to know more about our personal loan products, click here. While we may not be able to provide small business loans, we could help you get the short-term funding you need. Scroll up now and use our loan calculator to get started on your application and we could have an outcome for you in just 60 minutes (if you apply during AEST business hours). Thanks to instant banking, the cash could even be in your account and ready to use in 60 seconds*.

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It’s free to apply! So, what are you waiting for? Let Nifty lend a hand. 


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Andy Andy


Andrew Bell

Since founding Nifty in 2016, Bell has continued to make waves within the local financial sector for his continued ambition and willingness to adopt emerging technologies.

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