Average business loan interest rates in Australia right now generally range in the high single digits to mid teens, depending heavily on whether the loan is secured or unsecured and how strong the business is financially.
For well qualified borrowers with property or equipment security, it is realistic to see rates starting from around the mid 6s to mid 7s pa, while unsecured or higher risk facilities often sit well into double digits.
To keep things practical, here’s what lenders are quoting in the Australian market at the moment:
- Secured term loans (property or strong asset security)
Commonly around 6.5% to 11% pa for mainstream products, with ‘headline’ starting rates from about 6.39% – 7.5% pa for stronger borrowers. - Unsecured business loans
Often 10% to 20% pa, with many lenders publishing general ranges up to the high 20s for higher risk or low doc borrowers. - Equipment/asset finance
Typically a bit sharper, around 6.5% to 9% pa for good quality deals, with some ‘from’ rates advertised from about 5.99% pa. - Overdrafts and lines of credit
Usually higher than fully secured term loans, often from about 7.25% pa up to the mid teens depending on security and structure. - Short term / low doc / bad credit loans
Can easily range from the mid 20s pa and, in extreme cases, much higher. These are the ones that quietly kill cash flow if not managed carefully
What the ‘average’ really looks like…
If you strip away all the marketing and look at the Reserve Bank data, the average rate on new small business loans is sitting at approximately the mid 6% range per annum across the banking system.
That sounds friendly, but it hides a lot of variation:
- Better than average businesses with property security and clean financials can be close to or even below those averages.
- Smaller, newer or higher risk businesses, or those borrowing unsecured, are commonly paying well above those averages, often in the low to mid teens.
In other words, ‘average’ is like the RBA cash rate at a barbecue – nice talking point, almost useless for telling you what you will actually pay.
Key drivers of the rate you’ll be offered
Lenders in Australia all circle around a similar wholesale cost of funds, so the big differences come from how they price risk
- Security
Property or strong business assets usually drag the rate down. Unsecured or weak collateral pushes it up. - Time in business and performance
A profitable business with at least 2 years’ trading and clean BAS/financials will generally see sharper pricing than a start up or a business with lumpy cash flow. - Industry risk
Construction, hospitality and certain retail segments often attract a premium compared with ‘vanilla’ professional services or healthcare. - Loan type and term
Longer term amortising loans are often cheaper than short term, cash flow style facilities, that are priced more like risk capital.
Where this leaves you
If you tell most lenders “I just want the average business loan rate”, they’ll smile politely and then price your loan on your risk profile anyway.
The useful question is: “Given my security, financials and industry, what’s the sharpest rate the market will give me – and what lender will actually approve it?”
If you outline:
- How much you’re looking to borrow
- What security (if any) you can offer
- How long you’ve been trading and your approximate annual turnover
a tailored range can be mapped out so you know whether what you’ve been quoted is competitive, or whether your current lender is taking you for a bit of a ride.
Don’t leave your growth finance to chance. Every dollar borrowed should accelerate your business. Partner with our team to pinpoint your needs and craft a winning funding plan.