Time to apply for a business loan?
The thought of applying for a business loan could make many feel anxious. But it doesn’t have to.
A well-rounded application will always get you much further – If you’d like to know what you can do to avoid an unpleasant rejection, here are a few things to remember.
One question to rule them all.
Will you be able to repay the business loan?
That’s what underwriters are trying to figure out while looking at an application.
Lenders want to finance your business. They first have to understand why you need the funds. And how you’re planning to make a good return on the investment. But like any other enterprise, they need to have a clear view of the risks behind this decision. A successful business loan application provides this information by connecting the dots for the lender and what measures you’ll take to manage repayments.
Lenders also differ in their requirements, especially with the advent of alternative finance and online lending. Some ask for piles of paperwork, others only need access to your digital records.
Requests for business loans vary, depending on the amount of finance and the length of the contract. Our role is taking the time to customize your application to the criteria requested by the most suitable lender. We’ll make the process much easier, and by extension increase your chances of approval.
Don’t shy away from having a credit history when applying for a business loan
Records of handling debt in the past aren’t a bad sign. Quite the opposite, they boost your chances of approval. Especially since we’re often told that a pristine financial history is the only way to show you’re good at managing money.
It sounds counterintuitive, but to a lender, a clean slate leaves them guessing; it doesn’t show whether you’re capable of handling a loan appropriately.
Being approved for finance in the past puts you in the position of a business that another lender has chosen to trust. What’s more, having managed repayments and successfully returned the loan, you’re proving your ability to manage debt responsibly.
Know how much funding you need, and why
Lenders want to see how their finance will create profitable opportunities for your business. Otherwise, they’re missing a justifiable reason to trust you with the funds.
Part of convincing them is building a concise plan about your next steps. How much funding you will require. As well as, the reasons why the investment is sound. The less specific, the riskier you look as a borrower. Our job is to help them see you are not a risk throughout the loan application process.
Finding the right lender and meeting business loan requirements
Sometimes a business loan application is rejected not because of the business itself, but because the type of finance applied for isn’t the right fit.
For example, is a business line of credit the right source of capital or do you apply for a commercial mortgage or a long-term business loan? Our job is to select the right lender for the finance purpose required.
Delivering well-structured business loan application and organised documents
It’s wise to be careful about sharing your data with external bodies. That’s why responsible lenders take the utmost care to protect your information. Our lenders are granted temporary access by you, and only to documents that are essential for the reviewal process.
If you have accounting software it will remove much of the effort behind delivering the information required by the lender. Not only that, it will keep your paperwork in order.
Furthermore, the application is an opportunity for us to tell the story of your business and its next steps. To demonstrate how the loan will unlock growth, and ultimately be repaid. Hense, you’ll be an applicant that’s hard to say ‘no’ to.
Need a business loan? Contact us for sustainable lending and affordable finance options.
The Future of Business Loans cont
Recently, Federal Treasurer Josh Frydenberg unveiled a $2 billion fund designed to increase the flow of capital to Australian SMEs and improve competition in the business lending market.
It is said the government would introduce a $2 billion Australian Business Securitisation Fund, which will be invested in the securitisation market.
By doing so, the government is hoping to provide “significant additional funding to smaller banks and non-bank lenders to on-lend to small businesses on more competitive terms”.
Small businesses often find it difficult to obtain finance other than on a secured basis – typically, against real estate. Small businesses that have already obtained finance secured against real estate, but wish to continue to grow, also find it difficult to access additional funding.
Even when small businesses can access finance, funding costs are higher than they need to be.
In mid-2018, when releasing the Affordable Capital for SME Growth Report, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell called for government-backed investment into the SME sector through the ‘Business Growth Fund’. It will be specifically to focus on long-term funding solutions for SMEs that have the capability to grow.
Small lenders welcome chance to compete with big banks. It is suggested it will deliver a big shift in the way SMEs access credit to support their growth ambitions.
Small businesses are the engine room of our economy.
They are a major driver of employment and investment. And with the ability to borrow to fund their growth, small business has the opportunity to make an even larger contribution to Australia’s future economic growth and prosperity.
Without sustainable lending and affordable finance options, small and medium-sized businesses will struggle to grow, innovate and create more jobs for our economy.
By lowering borrowing costs, it will be improve the ability of good lenders to help even more business owners.
Contact us to guide you through the business loan application process here