Guide to NAB business loans for sole traders

Sole traders have several options when it comes to business loans. Understanding the different types available can help you choose the right one for the individual needs of your business.

1. Secured and unsecured business loans 

Secured business loans  

• A secured business loan requires collateral such as property, inventory or other assets as security for your loan.
• If the loan repayments can’t be met, the lender may rely upon these assets to clear the outstanding balance.​
• Secured business loans can often offer lower business loan interest rates.
• A NAB Business Options Loan is a simple medium to long-term flexible business loan, ideal for growing your business. The loan may be secured or unsecured, with flexible repayment and loan term options.

Unsecured business loans

• An unsecured loan is a type of financing that doesn’t require the borrower to provide any assets as collateral.
• The lender typically assesses the creditworthiness and business history of the borrower when deciding whether to approve the loan.
• Unsecured loans may have higher business loan interest rates. 

Example: The NAB QuickBiz Loan is a type of unsecured business loan offering between $5,000 and $250,000 to approved applicants, potentially suitable as an option for sole traders or small businesses. ​

Learn more about secured vs. unsecured business loans.

2. Business overdrafts 

Business overdrafts provide flexibility to manage cash flow fluctuations by allowing accounts to go into a negative balance up to an approved limit.​

Benefits of a business overdraft include:

• Ability to manage short-term cash flow fluctuations
• A ‘come and go’ facility designed to fluctuate between debit and credit regularly
• You only pay interest on the amount that you borrow
• The overdraft can be unsecured or secured by suitable residential, commercial or rural property, business assets or a combination of these.

Example: The NAB QuickBiz Overdraft is a type of unsecured business overdraft offering a revolving facility (also known as a business line of credit) of up to $50,000. It’s available to new and existing customers, with no fixed repayments and competitive interest rates. This flexible business line of credit linked to your business account can help cover short-term funding gaps.

Learn more in our guide to small business overdraft facilities.

3. Business credit cards

Business credit cards are useful for managing everyday expenses, building a credit history and separating business and personal spending.

Example: NAB’s business credit card options let you choose from a range of business credit cards with features like interest-free periods, rewards programs and spend controls.

Compare business credit cards to discover one that works for your business.

4. Vehicle and equipment financing 

When you're starting out or scaling up as a sole trader, having the right tools and equipment can make all the difference. Whether it’s a delivery van, a commercial oven, or specialised machinery, equipment financing can help you access what you need without draining your cash flow.

Example: At NAB, sole traders can explore tailored vehicle or equipment finance options that include business vehicle and equipment loan and finance leases. These solutions are designed to support business growth while preserving working capital. 

Learn more in our guide to buying vehicles or equipment.

Preparing a strong business loan application 

A strong business loan application is crucial for securing the funding needed to grow your business. By meticulously preparing and organising essential business loan documentation, you can help demonstrate reliability, transparency and a commitment to financial responsibility.

• Ensure that your application showcases a clear separation between personal and business finances, a robust credit history and well-explained income trends to significantly enhance your chances of approval.
• Provide a detailed business plan outlining revenue streams and growth strategies reflecting your foresight and readiness to manage and expand your business effectively.

This thorough preparation not only facilitates a smoother application process but may also instil confidence in lenders regarding your ability to repay the loan and achieve long-term success.

Financial challenges

As a sole trader, applying for a business loan can present several financial challenges.

• A common issue is income variability, where fluctuating earnings can make it difficult to plan finances and gain loan approval.
• Limited documentation can also pose obstacles, especially if traditional financial records are lacking, making it harder to secure business loans.
• The absence of collateral can make lenders perceive the loan as riskier, potentially leading to higher interest rates.

Understanding these hurdles is crucial for sole traders seeking financial assistance.

Ready to take the next step?

Whether you're just starting out your sole trader journey or looking to grow, NAB can offer a range of business loan solutions, but it’s important to ask questions and conduct research.

Explore business loans at NAB, or speak with a NAB business banking specialist who understands your industry and can help answer any questions you might have.