What type of loan or finance is best for a business?
Choosing the right business loan or finance can be tricky with so many options out there. Whether you’re a startup or an established business, knowing the financial solutions that work for your industry is key to its growth and survival. Banks offer standard loans but non-bank lenders may be better for some businesses.
At Maxiron Capital, we know that every business is different. That’s why we specialise in providing flexible, bespoke financing solutions to help business owners, property developers, and investors get the funds they need when the banks can’t.
Since 2002 we have helped businesses with mortgage loans, bridging finance, and more to take advantage of opportunities and navigate challenges with confidence.
Business Loans and Finance
Established in 2002, Maxiron Capital has been a leader in the alternative lending market in Australia. We have built a reputation for providing innovative, flexible, and low-rate financial solutions for a wide range of clients. We specialise in tailored loans for clients who can’t get finance through traditional banking channels.
Maxiron Capital’s excellence is reflected in our range of products including first, second, and third mortgages, equity release, and of course, bridging loans. This makes us the perfect partner for investors and businesses with complex financial needs.
We aim to provide fast funding and personalised service to help clients access finance when needed. We have the experience to help you achieve your goals. Our tailored approach means each client gets a solution designed for their situation.
Types of Business Finance
When it comes to financing a business, there are two main categories: debt finance and equity finance. Each has its pros and cons. Let’s tackle these two below.
Debt Finance
Borrowing money to be repaid with interest. Common debt finance options are bank loans, lines of credit, equipment finance and more. Maxiron Capital offers first, second and third mortgages and bridging loans for businesses looking to use assets like property.
Equity Finance
Raising funds by selling shares in the business. Investors get ownership in return for their investment. Equity finance options are venture capital,
Debt Finance vs. Equity Finance
When it comes to debt finance and equity finance, each option has its advantages and the best choice depends on your business’s financial needs, growth goals, and how much control you’re willing to share.
Debt Finance (Loans) | Equity Finance (Investment) | |
Definition | Borrowing money that you must pay back with interest. | Getting money from investors in exchange for part of your business. |
Ownership | You keep full ownership of your business. | You give up some ownership to investors. |
Repayment | You must make regular payments (with interest). | No need to pay money back, but investors get part of your profits. |
Cash Flow Impact | Regular loan payments can affect your cash flow. | No regular payments, so it doesn’t impact cash flow, but profits are shared. |
Cost | You pay interest on the loan. | No interest, but you give up a share of future profits. |
Collateral | You might need to offer assets (like property) to secure the loan. | No need for collateral, but investors get part of your business. |
Risk | If you can’t repay, you might lose the collateral (like property). | You don’t risk losing assets, but you lose some control over the business. |
Profit Sharing | You keep all the profits. | Investors get a share of the profits. |
Control | You have full control over the business decisions. | Investors may want to have a say in important decisions. |
Tax Benefits | You can deduct interest payments from your taxes. | No tax benefits for raising money through equity. |
Investor Relations | You only deal with the lender. | You have to manage relationships with investors. |
Time to Get Funding | Getting a loan is usually quicker, especially if you have assets. | Raising investment can take longer, especially with negotiations. |
Exit Strategy | You just need to repay the loan. | Investors may want an exit, like selling the business or going public, to get their money back. |
Debt Finance Options
Traditional Business Loans
These are standard loans where the business gets a lump sum to be repaid with interest over a fixed term. It has two types: unsecured business loan and secured business loan.
- Secured Business Loans – A secured loan requires the borrower to provide collateral, such as property or other assets, to secure the loan. This usually results in lower interest rates, but the risk is that the lender can seize the collateral if the borrower fails to repay the loan.
- Unsecured Business Loans – An unsecured business loan does not require any collateral. While this reduces the risk of losing assets, it often comes with higher interest rates and stricter eligibility criteria due to the lender’s increased risk.
Advantages | Disadvantages |
– Predictable repayment schedule. – Retain full ownership of the business. – Lower interest rates (especially with secured loans). | – Must be repaid with interest. – Requires collateral (in most cases). – Affects cash flow with regular payments. |
Used for business expansions, purchasing property or other big investments.
Business Overdraft and Line of Credit
This gives you more flexibility to draw funds as needed.
Advantages | Disadvantages |
– Flexibility to borrow as needed. – Pay interest only on the amount used. | – Higher interest rates than term loans. – No set repayment schedule, which can lead to overspending. |
Used for daily operations or to bridge cash flow gaps.
Equipment and Asset Finance
Businesses that need to purchase big ticket items (like machinery or vehicles) use this type of finance.
Advantages | Disadvantages |
– Allows businesses to purchase essential equipment without upfront costs. – The asset often serves as collateral, making it easier to qualify for the loan. | – The business does not fully own the asset until the loan is repaid. – If repayments are missed, the asset may be repossessed. |
The asset is used as collateral until the loan is paid off.
Invoice Financing
For businesses with delayed client payments, invoice financing allows them to borrow against unpaid invoices so they can have funds to operate without waiting for clients to pay.
Advantages | Disadvantages |
– Quick access to cash by borrowing against unpaid invoices. – Helps businesses manage cash flow during payment delays. | – Limited to B2B businesses with commercial invoicing. – Typically provides smaller sums than loans. |
Bridging Loans
These short term loans help businesses cover immediate financial needs especially when waiting for funds from a future transaction, like selling property or completing a project.
Advantages | Disadvantages |
– Useful for short-term financial needs or temporary cash flow gaps. – Fast approval and flexible terms. | – Higher interest rates compared to longer-term loans. – Must be repaid quickly, adding financial pressure. |
Chattel Mortgage
This allows businesses to purchase assets like vehicles or machinery outright with the asset as security for the loan.
Advantages | Disadvantages |
– Immediate ownership of the asset. – Interest may be tax deductible. | – If the loan is not repaid, the asset can be seized. – Business must maintain the asset value for the loan duration. |
Equity Finance Options
Venture Capital
Venture capitalists (VCs) invest big money in businesses, usually startups or high growth companies. In return they get a share of the business and may also have a say in business decisions.
Advantages | Disadvantages |
– Access to significant funds. – Investors often provide business expertise and connections. | – Loss of equity and control over decision-making. – High expectations for rapid growth and returns. |
This is usually for businesses in industries like tech or innovation where rapid scaling is possible.
Angel Investors
Individual investors who use their personal wealth to fund startups or small businesses. Along with capital, angel investors often bring valuable mentorship and industry connections to help businesses grow smarter.
Advantages | Disadvantages |
– Quick access to capital. – Investors may provide valuable mentorship and industry connections. | – You give up a portion of the business. – Investors may expect quick profits, adding pressure. |
Crowdfunding (Equity-Based)
Businesses raise money from multiple small investors, each investing small amounts in exchange for equity in the company.
Advantages | Disadvantages |
– Can raise money from a large group of people. – No repayment obligations. | – Loss of equity. – Requires an innovative or exciting idea to attract investors. |
This is good for startups or innovative projects that appeal to a large audience.
Mezzanine Financing
This combines elements of debt and equity. Business gets a loan but if they don’t repay it the lender can convert the debt into equity in the business.
Advantages | Disadvantages |
– Combines benefits of debt and equity. – Flexible repayment terms; no risk of immediate bankruptcy. | – High interest rates. – Risk of losing equity if repayments are missed. |
Public Float
A public float (or initial public offering, IPO) is selling shares of the business to the public on a stock exchange.
Advantages | Disadvantages |
– Access to large amounts of capital. – Potential for increased brand visibility. | – Significant loss of control. – Ongoing obligation to shareholders. |
This is usually done when a business has grown big and wants to grow even bigger.
Which Finance Option Is Right for Your Business?
The right finance option for you will depend on several factors including its stage, financial health and how much control you’re willing to give up. For example:
- Business stage – Startups may go for equity finance, and established businesses may prefer debt options like loans.
- Financial health – If your business has strong cash flow, debt finance may be the way to go. If cash flow is uncertain, equity finance may be more flexible.
- Ownership preferences – Businesses that want to retain full ownership may go for loans, those open to sharing control may consider equity options.
How We Can Help
At Maxiron Capital, we know no two businesses are the same and that’s why we offer bespoke financial solutions. Whether you need a short-term loan to manage cash flow, a bridging loan for property development or any other form of flexible finance, our team is here to help.
With over 20 years of experience in alternative lending, Maxiron Capital has become a trusted name for businesses looking for funding outside the traditional banking system.
Our expertise in first, second and third mortgages means we aim to provide fast, flexible funding solutions for your business to thrive.
