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Do you know if your business would qualify for a loan?

Find out the criteria you need to meet when applying for a business loan.

Running your own company can be daunting, especially considering the kind of money it takes to launch and maintain a successful business. Before applying for financing, it’s important to analyse the cash flow problem you’re experiencing. Being clear on exactly where you’re lacking money is the key to choosing the right kind of loan.

How do I know if I’m eligible for a loan?

Just as an individual has to meet certain criteria when applying for a personal loan, your business is evaluated based on a key set of factors when you apply for a business loan. While there’s no way to know for sure if your business will be approved, you can start by checking the minimum eligibility requirements and making sure you can meet them. Then, consider whether your business can afford the loan, and what information you can provide as evidence of its financial capabilities.

What kinds of loans are available to businesses?

When your business is in need of finance, here are a few options to consider.

  • Revolving line of credit. A popular option among Australian businesses, a revolving line of credit provides financial relief for short-term cash-flow issues. You only pay interest on the amount you use, and you have to option to reduce interest by making early repayments.
  • Invoice factoring. This allows you to borrow against outstanding invoices for up to 85% of the total invoice value. You repay the lender once your invoices have been paid. Unlike other types of loan, this option may be approved for companies declaring bankruptcy.
  • Equipment loans. These loans operate on the same principles as car or home loans, where you borrow the money to purchase equipment and then repay the loan in fixed instalments over a set period of time.
  • Purchase order financing. If you can’t fulfill an order due to financial constraints, you can apply for financing based on the size of your order. The lender then pays your suppliers directly.
  • Unsecured business loans. Many business loans are guaranteed by using valuable assets as collateral, such as equity in your home. An unsecured loan requires no such collateral, but approval is often subject to more stringent criteria.

What do lenders consider when approving business loans?

Once you’ve identified your financial issues and chosen a loan that suits your needs, it’s important to make sure that your business fits the lender’s profile of a “reliable borrower”.

  • Time in the industry. How long you’ve been operating will have an impact on your application, but the timeframe varies according to the kind of loan you need. For example, a revolving line of credit usually requires that your business be at least one year old, while invoice factoring can be granted to businesses operating for a minimum of six months.
  • Minimum revenue. Depending on the kind of loan, your earnings will be taken into account when you apply. The minimum revenue required depends on the type of loan and how much you want to borrow. For example, you may need to make a minimum of $200,000 to qualify for a line of credit. An equipment loan application, on the other hand, normally doesn’t consider your minimum earnings at all.
  • Personal credit score. You have to show that you’re able to repay a loan. A director’s credit history can come into play when being assessed for a loan, and a good credit score may be required.
  • Company credit. In addition to personal credit scores, the company’s debt record may also be examined for unpaid defaults on existing loans. Companies have credit files and credit scores which can be accessed and assessed by prospective business partners and lenders. If you can’t repay the loans you already have, lenders may think you might have trouble meeting obligations on any other lending product.
  • Tax debt. Depending on the kind of loan you need, owing money to the Australian Tax Office (ATO) can negatively affect your application. However, you can look into a loan to specifically pay off tax debt if you want to reduce the risk of lenders declining your application based on outstanding ATO payments.

No matter what you need business finance for, there is a range of options available. By having a good understanding of the eligibility criteria that may apply, you can make sure you apply for the right kind of loan and increase your chances of approval.

Business loans you can apply for

Rates last updated October 21st, 2018
Name Product Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
NAB QuickBiz Loan
$5,000
$100,000
1 to 3 years
$0
Apply for up to $100,000 and get a response within 60 seconds. No upfront or ongoing fees and a transparent fixed rate.
Lending Express Business Loans
$5,000
$500,000
0.25 to 2 years
$0
Apply online for up to $500,000 and get access to over 25 lenders through Lending Express.
Valiant Finance Business Loan Broker
$5,000
$1,000,000
0.25 to 5 years
$0
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.
Moula Business Loan
$5,000
$250,000
0.5 to 2 years
$0
A loan of up to $250,000 that can be approved and funded within 24 hours. Available to businesses with 6+ months operating history and $5,000+ monthly sales.
GetCapital Flexible Business Loan
$5,000
$500,000
0.5 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+
businessloans.com.au Flexible Business Loan
$5,000
$500,000
0.5 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.
Prospa Business Loan
$5,000
$250,000
0.25 to 2 years
$0
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.
OnDeck Business Loans
$10,000
$250,000
0.5 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.

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