Buying a small business in Australia is a popular way to step into entrepreneurship, and a $100,000 purchase is often within reach for first-time buyers. If you’re considering borrowing $100,000 for a business in Australia, it’s important to understand loan options, lender requirements, repayment terms, and how much profit you’ll have left to live on. Here’s everything you need to know.
Loan Options for Borrowing $100,000
There are several financing options available for purchasing a $100,000 business:
- Traditional Bank Loans: Banks typically require a deposit of 20%-50% ($20,000-$50,000), a solid credit history, and evidence of business profitability. Learn more about bank loans on NAB Business Loans.
- Business Loan Specialists: These lenders often provide more flexible terms for small business buyers. Explore options on Prospa Business Loans.
- Government-Backed Loans: Programs like the SME Loan Guarantee Scheme can offer competitive rates and terms for eligible borrowers. Find details on the Australian Government Treasury website.
Lender Requirements
To qualify for a $100,000 loan, lenders typically look for:
- Deposit: 20%-50% of the purchase price.
- Credit Score: A strong credit history, ideally 650 or above.
- Experience: Prior business experience or a plan for training and support.
- Business Plan: A clear outline of how you’ll run and grow the business.
Loan Repayment Examples
Here are two repayment scenarios for a $100,000 loan over 5 and 7 years at an 8% interest rate:
- 5-Year Loan:
- Monthly Repayment: $2,027
- Annual Repayment: $24,324
- 7-Year Loan:
- Monthly Repayment: $1,561
- Annual Repayment: $18,732
Profit Remaining After Loan Repayments
A $100,000 business generating $100,000 in annual profit equates to $8,333 per month. After loan repayments:
- 5-Year Loan: $8,333 – $2,027 = $6,306/month
- 7-Year Loan: $8,333 – $1,561 = $6,772/month
Strategies for Faster Loan Repayment
- Increase sales and reduce expenses.
- Make extra repayments when possible.
- Use windfalls like tax refunds to reduce the loan principal.
If you need help discussing your borrowing options, contact our friends at Alegio Partners.
Key Takeaways
- Borrowing $100,000 for a business in Australia typically requires a deposit of 20%-50% and a strong financial profile.
- Loan repayment scenarios suggest monthly repayments of $2,027 for a 5-year loan and $1,561 for a 7-year loan.
- A business generating $100,000 in annual profit leaves approximately $6,306 to $6,772 per month in disposable profit after loan repayments.
- Traditional banks, business loan specialists, and government-backed programs are viable financing options.
- Strategies like increasing sales, making extra repayments, and using windfalls can accelerate debt repayment.
