7 Tips for Securing a Business Loan

Securing a business loan in Australia isn’t necessarily difficult but knowing how to navigate your way can be the difference between success and failure.

Banks and other financial institutions offer a wide range of business finance options, from commercial property loans, to vehicle or equipment loans, to letters of credit and overdrafts.

Here are some tips on how to improve your chances of success.

1. Work out what is realistic

Think about the amount of money you need to borrow, how you want it supplied and the type of security you want to provide (residential, non-residential or none at all). Lenders will often lend more if the loan is secured against a residential property rather than a commercial property.

The interest rates and fees and charges may also be less.

2. Do your research

We will work with you to determine your borrowing needs and abilities, select a loan suited to your circumstances and manage the process through to settlement.

We can help you work out what loan type and lender are best for your business and you.

3. Have a credit history and make it good

Lenders are looking for two things when it comes to your credit status: an existing credit relationship and a relatively clear history. If a borrower already has an existing loan which they’re servicing on time, they are much more likely to be successful. Of course, there are options for those who are either credit impaired or just don’t have a documented credit history, and a credit adviser can help clarify these.

4. Actively show how risk will be minimised

Demonstrate how you will lessen the risk to you and to the lender. This can include demonstrating that your cashflow is strong, limit the percentage of the property value you require as a loan, show your business is improving year on year etc.

5. Be prepared

For your first meeting with us, have up-to-date paperwork and tax records, make sure you’ve done your research and have a fair idea how much you want to borrow and how you plan to spend it. You should also know your total worth, listing your assets and liabilities.

Remember that lenders will only consider the income you can prove via your financials and tax returns etc. If your business has a cash component from a lending perspective it doesn’t exist.

6. Have a plan

Lenders like to see a business plan that shows you know what you want to achieve and have a clear idea of how you can achieve it.

7. Provide more than one exit strategy

Lenders want to know how they’re going to get their money back and some want up to three scenarios for what is called the ‘exit strategy’. This can include the normal repayment of the loan over the set loan term, or planned sale of assets at specific times that will accelerate debt repayment.