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Depending on the type of business you operate and what you're after, the best borrowing option for your business needs could be a credit card, overdraft or loan. Here are a few things to consider that can help you decide.
Some common reasons you may be looking to borrow are to:
For each option, the interest rate will determine how much you have to repay each month. Credit cards for example, have two common types of interest rates - purchase interest and cash advance interest rate. Make sure you understand when you could be charged both. Check out our quick guide which explains how interest is calculated for credit cards and loans.
Each product option has different conditions around repayment, with some more flexible than others. For a variable business loan, for example, you'll pay back an amount each month over a set period of time of up to 30 years. The amount you repay could change if the interest rate moves.
With a business overdraft or credit card, you can pay off as much as you want so long as it's above the minimum monthly repayment (this may include the interest, fees and charges incurred in the month). However, additional fees may apply if not paid in full.
Before you borrow, make sure you have an idea of how much you can repay a month and whether this will vary. Creating a cash flow forecast can help you work this out by predicting money flowing in and out of your business for the next 12 months.
Loans typically have establishment fees and if your contract is fixed and you choose to pay it out before the end of the fixed period, you may be subject to an Early Repayment Adjustment and administration fee.
Credit cards typically have annual, cash advance and late payment fees.
Overdrafts typically involve a line/limit fee, monthly account fee and interest.
An ASB Business Manager can explain each option in more detail and help you understand which may best suit your needs.
If you need help to figure out what type of business lending and level of funding you need, talk with your accountant or get in touch with us and talk to someone from our specialist team.
Every business is different and has unique banking needs, discover your options.
ASB's lending criteria, terms and fees apply.
This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice before acting on this information.