Small Business Funding Options Compared: Your Complete Guide

Small businesses in Australia and New Zealand have more funding options available than ever before. The challenge is understanding which product is right for which need.

This guide compares the main options in plain English, so you can make an informed choice without needing to read a finance textbook.

The Main Options

Business Overdraft

What it is: A pre-arranged credit limit attached to your business bank account. Draw down as needed, repay as cash comes in.

Cost: 12-20% per annum on drawn balances. Often has an annual facility fee.

Speed to access: Days to weeks to set up. Immediate once established.

Security required: Often requires a credit assessment; sometimes property security for larger amounts.

Best for: Short-term cash flow buffers. Not well-suited to large working capital needs.

Business Term Loan

What it is: A fixed amount borrowed and repaid over a set period with interest.

Cost: 7-15% per annum for secured lending; higher for unsecured.

Speed to access: Weeks for bank loans; days for non-bank lenders.

Security required: Often yes — property, equipment, or personal guarantee.

Best for: Long-term capital investment — equipment, fit-out, acquisitions. Not designed for working capital.

Invoice Finance

What it is: Advances funds against your outstanding invoices. Access cash you have already earned without waiting for clients to pay.

Cost: 1-3.5% per invoice funded. No ongoing fees with FundTap.

Speed to access: Hours once connected. No lengthy application.

Security required: No property or personal security. Based on debtor creditworthiness.

Best for: Working capital timing gaps. Businesses that invoice other businesses.

Business Credit Card

What it is: Revolving credit for business purchases.

Cost: 18-22% per annum if carrying a balance. Rewards if paid in full.

Speed to access: Days to set up; immediate once established.

Best for: Small purchases paid off quickly. Not suitable for large working capital needs.

Merchant Cash Advance (MCA)

What it is: An advance against future card sales, repaid as a percentage of daily revenue.

Cost: Can be very expensive in effective rate terms — factor rates of 1.1-1.5x are common.

Speed to access: Fast — often within days.

Best for: Retail and hospitality businesses with consistent card turnover. Not suitable for B2B businesses.

Asset Finance

What it is: Finance secured against a specific asset — vehicle, plant, equipment.

Cost: Varies; often 5-12% per annum.

Best for: Equipment purchase where the asset provides security.

Choosing the Right Option

Match the funding type to the purpose. Using a long-term loan for short-term working capital is expensive and inflexible. Using invoice finance for a capital investment is inefficient. The right match makes a significant difference to the total cost and flexibility of your funding.