Are you able to apply for a loan for your business?
This is a common question for new entrepreneurs. You may not be familiar with the requirements for securing a loan if you have never dealt directly with a bank’s business arm.
This can result in rejections which make it harder to obtain a loan.
You don’t want this to happen. As Michael Baker discovered, a small business loan can make a huge difference in your business.
Michael is the sixth generation of Queensland-based decorators. After several builders withheld payments for the work he had completed, he was desperate for funds.
He needed additional funding, so he applied for a small business loan.
He was able to stabilize the company during difficult times with the loan. After a period of decline, he could restart growing his business by hiring two more people.
Michael’s business would have been destroyed if he didn’t find out how to obtain a small-business loan.
Perhaps you are in a similar position. You need to get your application approved so you can move on quickly.
These are five tips to help you get it done.
Tip #1: Know the Reason and Amount Before Time
Lenders will first want to know the reason you are applying for a loan.
You must give a reason and show that you have calculated an accurate figure to resolve any issue.
Lenders may decide that you don’t need the loan because you haven’t clearly stated your needs.
It also means you won’t know what you should do with your money if you get it.
Discuss the problems that you are trying to solve with your team. You will need a plan of action to present your ideas to lenders. There are several reasons small businesses may be eligible for a loan.
- As was the case with Michael, solving cash flow problems is possible.
- Purchase equipment and inventory for your business.
- Further growth funding
Prepare a presentation that explains why you want to borrow the money. It is important to show that you are not a risk and that the loan will significantly benefit the business.
Tip #2: Examine the Potential Expense
You can often work out how much you will be required to repay over a certain time period by looking at the calculators provided by lenders. You can even find calculators on the websites of many lenders to assist you with this.
When applying for a loan for your business, it is important to consider the outgoings.
The goal is to determine how much you can afford each month.
At first glance, a loan with a low-interest rate and a short term may sound appealing. However, a short term loan can mean higher repayments. You put your business at risk if you cannot afford them.
To determine what you can afford, you should examine your cash flow forecasts. This information can be used to determine the best term for you and which lenders are not available to help.
Tip #3: Be Transparent at All Times
It can be tempting to hide financial difficulties from lenders if you are in dire financial straits.
This is a big mistake, and it’s not how you get a small-business loan.
Before approving your application, many lenders will need to review your documentation. They will also check your credit history and company viability.
Keep accurate records that you can show the lender when necessary. Tell the truth about your situation. If you are hiding anything, a lender may refuse to approve your application.
Tip #4: Review your Credit Score Before Hand
During the application process, many lenders will examine your credit score. You may have trouble applying for a loan for your business if you have poor credit.
First, you must fix the problem.
You can view your credit history with several different services. Experian and Equifax are two examples.
Before you apply, make sure you are aware of your current standing. Failure to apply for loans can often be recorded as a black mark on your credit score. This can lead to a vicious circle where each rejection makes it harder to get a loan. It’s worth taking steps to improve your credit score if you have bad credit.
Tip #5: Understand the Fees
Sometimes a loan might look attractive based only on its marketing.
However, you will discover that many fees can harm your business.
It is important to read the fine print and ask the lender questions about any additional fees. It’s not about how you apply for a loan to your business.
You need to ensure that you get the right loan for your company.
You should be aware of several fees. The following are some of the possible fees:
- There are no setup fees
- Exit fees
- Early repayments are subject to fees
- Monthly fees the lender may charge.
You should also check the penalties for late repayments. This will ensure that they are not too high.
Get Help from a Lender
One last tip when looking for a small business loan is to be sure you know it.
Locate a lender that is willing to assist you.
Unsecured Finance Australia provides exactly that. Unsecured Finance Australia offers unsecured business loans up to $300,000.
You don’t need to worry about how you apply for a loan for your business. Our website makes it easy to apply for a business loan.