Applying for a Business Loan: 3 Things You Need to Know
Getting loans to launch and maintain your company is common practice for business owners. It’s a practice that you should be familiar with for different stages in your company’s growth. If you make the wrong investment, you may end up incurring more debt than what your ROI projections tell you.
How to apply for a business loan in Australia
Most entrepreneurs need to find the right lender to get sufficient funding since they don’t have enough starting capital. Applying for a business loan is an effective way to improve your credit while progressing your money-making enterprise’s sales output. Some people underestimate having a proper guide on the application process and its demands, so they make bad business decisions.
If you’re planning to apply for a business loan, here are three things you should know:
1. Be mindful of your documents
Applying for business loans becomes more manageable if you have all your pertinent documents in check. These include your bank statements, expenditure reports, business and individual income, tax returns, ATO statements and more.
It pays to be an organised business owner since it increases the chances of lenders to accept your application. Make sure that you provide full reports of your business’s bookkeeping. Avoid having blank spots or missing dates in your catalogues. At the very least, offer a rational explanation for these missing data.
2. Good credit expands your lending options
Like when applying for a mortgage, getting a business loan requires you to prove your credibility as a borrower. Since lenders are taking a risk on your application, you should provide documents to prove that you have good credit. Some paperwork you can provide are trading histories, personal and company credit histories, debt-to-income ratios, current assets, and revenue reports.
Different lenders will have varying ballpark figures for what counts as a minimum acceptable credit score. If you have a credit score below 550, you’re already in a risky position. Thankfully, there are some types of loans that don’t prioritise credit scores.
3. Know the type of loan you’re applying for
As a business owner, you may be borrowing money for a wide variety of reasons. It can range from paying outstanding debts and improving cash flow operation to expanding to new markets. Regardless of your purpose, different loans can match your current credit score and capital needs.
- Secured loans: It’s an option if you want to put up collaterals, such as real estate and vehicles, in place of capital as down payment. Although the lender can claim your assets if you can’t pay your loan, secured loans give you the benefit of lower interest rates.
- Equipment finance: If you’re running a brick-and-mortar shop or a trade business, you can secure equipment finance to pay for your logistical needs. It applies to machinery, hardware and even vehicles necessary for your operations.
- Equity loan: It puts your commercial or residential property as collateral in exchange for 100% of its market value. However, the advantage of equity loans is that you can apply for it even with poor credit scores.
Additionally, you should be aware of the fees and additional charges that come with applying for these respective business loans.
Learning how to apply for a business loan isn’t that complex. However, you need to pay close attention to the requirements and deadlines that you should meet. Additionally, it doesn’t hurt to get help from business loan experts to point you towards the right lenders.
If you need a reliable lender for your business, our team at Business Loan Experts can connect you with the best business loans in Sydney. Get in touch with us today, and we’ll make sure to find the right lender that suits your company’s needs!