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You need money to run a business and you can't always rely on your savings or incoming revenue to cover costs. Because of this, taking out a business loan is fairly common in Australia, with lenders having more than $40 billion worth of business loans and advances on the books.
There are lots of reasons your business may need a loan, especially if you're just starting out.
Find out how to apply and how to get approved below.
Your loan application should answer the following questions:
Remember that taking out a loan is a competition: you are up against other people who want to borrow money. Improve your odds by standing out and showing that your business has more value and potential.
Your application needs to convince the lender that the money will help your company become more profitable or is essential to its continued operation, and that you will have enough revenue to pay back the loan.
Different business loans and lenders will require you to provide certain information as part of your application, including:
You may also need to meet specific eligibility criteria to get approved for a loan. As such, you may also need to provide documentation of the following in your application:
When you’re given a loan, a lender wants to know that you will be able to pay it back. The lender's confidence in your business’s profitability and your ability to repay the loan decides whether or not you get approved. Tick off all of the following points for the best chance of business loan approval.
Whether your business is eligible for a loan
Lenders will check your credit history before deciding whether or not to give you money. For the best odds of success you should also check your business credit score so you can remedy any problems before applying.
Your credit history includes:
To check your credit report, simply contact a credit reporting body (CRB). Keep in mind you will need to pay a fee to receive your business credit file.
You have a number of options when it comes to getting a business loan:
This loan gives you a predetermined limit that you can overdraw up to on your business bank account. This can be good for covering unexpected costs or if your business is having cash flow problems. It is a flexible form of finance and you can often tailor your repayment plan.
This loan takes the form of an account balance that can be drawn on up to an agreed limit. It’s a lot like a business overdraft loan, except you can draw on funds as needed and not just when experiencing cash flow issues.
A short term loan is for covering immediate costs. It gives your business quick access to cash or credit to pay for urgent repairs, emergencies or vital equipment. Repayment terms are short, typically about three months to one year, and the sums you can get are smaller than other loans.
These work much like personal credit cards, giving you access to funds up to a certain limit and allowing you to continuously pay back what is spent with interest. This financing option is designed to be accessible, flexible and suitable for many different businesses.
Business credit cards offer a range of extra benefits and tools, such as multiple cards for employees with their own customised limits, expense tracking and even analytics tools.
Cash flow lending is a type of secured loan that uses your predicted business cash flow as collateral. In other words, you borrow against future revenue. For example, you might get a cash flow loan to fund new equipment or staff and then use the revenue generated by these to pay back the loan.
A relatively new product, invoice financing is a fairly specialised type of loan that uses your outstanding customer invoices as collateral. It’s suitable for businesses that are willing to trade some total profit for more consistent income. Financing involves selling the invoices that you’re waiting on to borrow a proportion of that amount, often 80–100%, depending on your business credit score and applicable fees.
Trade financing is a loan that gives your business the money to make trades, whether domestic or international, in currency or stock. It’s aimed at businesses that have a good track record with capital investment and can use loans to invest further. The actual lending component is usually just one part of a packaged service that includes financial technology, transaction services, risk management and advisers.
A fully drawn advance is a long term business loan where you can borrow a fixed amount and then repay it with interest on a set schedule. You are often able to customise the loan with your lender to set a repayment schedule that works with your business cash flow.
This type of loan is exactly what it sounds like; it lets you fund a vehicle purchase for your business with ongoing repayments. The actual terms of these loans vary and include choices such as borrowing money to buy a car, leasing a vehicle from the lender, getting a secured or unsecured loan and opting for a general-use or business-only car.
Equipment finance can help your business get the necessary tools, whether that’s specialised medical or scientific equipment, plant machinery, IT devices or anything else. This type of financing gives you quick access to essential items with a range of different options.
The first step to successfully getting a business loan is deciding what type of financing your company needs, while the second step is getting approved.
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An unsecured business loan with online application and no upfront or early repayment fees.
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