How banks assess a business loan application

Find out what lenders are looking for and what you'll need to do to get approved for a loan.

Many businesses rely on loans to get off the ground, and financing is considered a normal part of the business process. To be eligible for a loan, you'll need to convince the lender that your business is a viable investment and that you'll be able to repay your loan on time.

Every bank has its own system for assessing a loan application and will have certain eligibility criteria that you will need to meet to be approved for a loan. Find out what they look for and how to get approved, and compare your loan options below.

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Moula Business Loan Offer

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Updated April 24th, 2019
Name Product Min. Loan Amount Max. Loan Amount Loan Term Application Fee
6 months to 3 years
A loan of up to $500,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.
3 months to 2 years
A business loan available up to $250,000 that can be funded in 1 business day. Must have a turnover of $6,000+ per month and provide 6 months of trading history, 3 months history for existing business purchases.
3 months to 5 years
A Small Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 60 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
6 months to 2 years
Initial draw down fee
A business loan up to $100,000 for unsecured loans, or $500,000 for secured loans that you can use for any business purpose. Transparent costs and redraw facility available.
6 months to 2 years
2.5% origination fee
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
1 month to 3 years
An unsecured business loan from $2,000 that offers convenient pre-approval and no early repayment fees.
6 months to 2 years
Initial draw down fee
A flexible business loan up to $500,000 with convenient top up and redraw facilities. Business must have been operating for 9 months+ and have monthly sales of $10,000+

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Will I be eligible for a business loan?

Different banks have different requirements that you will need to meet to be eligible for a loan, but there are some general criteria that apply. However, the specific requirements will vary with each lender, so make sure to check with a specific bank to see if you will be eligible.

  • Trading history. You'll need to have been operating for a certain period of time (generally at least 3 to 6 months) to be approved for an unsecured business loan. Some lenders do offer loans for new businesses, and you may also have the option of alternative financing, such as invoice factoring and equipment loans. These loans will often not require your business to be a certain age.
  • Turnover. Many banks will also require that your business has a certain level of turnover to be eligible for a loan. The revenue required may be as little as $5,000 per month, or up to $200,000 per year, depending on the bank.
  • ABN/ACN. You'll need to have an Australian Business Number (ABN) or Australian Company Number (ACN) to be eligible for most business loans in Australia.

What documentation do I need to provide?

Unlike regular personal loans, banks will often be quite strict with the documentation they require as part of a business loan application. You will need to provide extensive documentation on behalf of both you and your business, especially if you're applying for a large loan amount or represent a risk to the lender.

You should have all of the following items ready before commencing an application:

  • Personal identification such as a driver's licence. You will always be required to provide this.
  • Business verification. You will need to prove the existence of, and your ownership of, the business.
  • Financial history. Lenders will almost always want to get an idea of how strong your personal and business finances are. They may ask to see bank statements, sales records, expenditure reports and other documentation to help them ascertain how risky it is to give your business money.

As well the documentation above, you should ensure that your business's financial information and details are up-to-date, and be willing to provide any further documentation requested by the bank at short notice.

What questions will I be asked when applying for a business loan application?

To start with, many lenders will want to know more about your business and how you plan to spend the money. This will be determined by asking you certain questions. Make sure you have answers for all the following:

  • What is the purpose of the loan? It's not enough to say that it's for starting or running a business. The bank will want to know the specific need for the funds, whether it's for vendors, refurbishment, staff costs, training new employees, expanding your business, handling litigation or anything else. The more specific you are the better. You should know how you plan to spend the money before asking for a loan.
  • How much do you want to borrow and when do you need it by? Banks look for borrowers that have a specific amount of money and time frame in mind. This demonstrates that you have a clear spending plan.
  • What is your preferred repayment plan? You might not get exactly the terms you would like, but you do often have some control over the repayment period and size of repayments. If you can present a proposal, it shows the lender that you're on top of your business's profits and expenses. It also proves you have given thought to how you will pay back the loan with interest, which is what the bank mostly cares about.

If you can't answer these questions your business loan application might not make it past the initial enquiry.


The five Cs: What banks look for in a loan application

The Five Cs

  • Character
  • Collateral
  • Capacity
  • Capital
  • Conditions

"The five Cs method" as it's known, refers to five key factors banks examine when deciding whether to accept or reject an application: character, collateral, capacity, capital and conditions.

By having a good understanding of each of these Cs, you can tailor your business loan application to ensure it addresses each of them.

Here's a breakdown of each of these factors to get you started:


This covers your integrity, reputation and overall willingness to make good on your debts. Lenders examine your character by:

  • Looking at both your personal and business credit history.
  • Examining your financial history with an eye to prudent spending, general savings and organised financial management.
  • Checking your relations with other lenders, banks and credit agencies and seeing whether you pay off business loans on time.
  • Determining your personal and professional stability through factors such as how often you change jobs, whether you had past business ventures that failed, how well you save money and whether you've had any legal issues.

Your character should demonstrate stability, consistency and reliability in financial matters. Providing bank statements, a credit report and copies of compliance-related payments such as GST and taxes can help.


What happens if you can't pay back the loan? What kind of security can you offer the lender? If you take out a secured loan, it means you borrow against collateral, such as a house or car. This can get you a loan with better rates, but it means the lender can claim the collateral if your loan is not paid. If you take out an unsecured loan, then you are borrowing without collateral.

Lenders prefer secured loans as they are a safer bet. An applicant who is declined for an unsecured loan might still be able to get one that is secured.

These are the types of things that are considered in a secured business loan application:

  • The type of collateral provided. This could be your house or business property, a vehicle, land or any other asset. Different lenders might have different preferences based on their own business interests.
  • The current and future market value of the collateral. Lenders will want to determine that the collateral has an adequate market value across the lifespan of the loan, so they can sell it if you are unable to make your repayments.

You will need detailed information on any property you intend to use as collateral, including its purchase date, current valuation and photos of the item.


Capacity refers to you and your business's financial ability to repay the loan. A company where the income is less than the requested loan's interest rate, for example, would have a clear failure of capacity. A great character isn't enough without good capacity.

Lenders will consider:

  • Your business profits and personal income. Are these enough to pay back a loan?
  • Other debts, any dependants and your living expenses. These make a big difference to whether or not you have the capacity to repay a loan.
  • How stable your earnings are. If they're consistent, you have a better chance of obtaining the loan you desire. If they fluctuate, are seasonal or can otherwise be difficult to predict, banks will find these conditions less favourable.

Make sure you provide financial information which shows that you have the financial capacity to repay a loan.


This category takes into account your personal and business assets, and liabilities. Having capital reserves is favourably regarded by lenders. It means they can be sold off or liquidated in order to meet loan repayments, either as collateral or by you personally.

What lenders will be looking for:

  • Are your assets sellable? Can they be quickly and easily liquidated for a good return, or are they more difficult to unload?
  • What is your business's financial position? If publicly traded, what is its share value and equity distribution?

Take along historical balance sheets for past years, and budgeted balance sheets for upcoming years, to help lenders assess your capital.


This refers to the terms and conditions under which the lender offered the loan. These can be more or less favourable for them or for you. When the lender has preferable conditions, it may be willing to give more leeway in a business loan application. Terms and conditions considered include:

  • Repayment schedule. How long it will take to pay back the loan and how frequently you make repayments.
  • Pricing. Higher interest rates and fees mean more money for the bank and make them more likely to accept your loan application, even if it's a bit riskier.
  • Other conditions. Some loan conditions may include certain requirements to be fulfilled, or contain conditions that impose additional responsibilities on you. A lender will consider the precise terms and conditions of a loan next to your application when deciding whether to accept or decline it.

Be sure to consider all the terms and conditions of a loan in detail. You may wish to contact a financial adviser to help you. If you're unsure of anything in the contract, your lender is obligated to answer any related questions honestly.

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