How To Prepare For Your First Business Loan

This article was prepared to make it easier for first-time borrowers to prepare for their first business loan application. Simply follow these 5 steps to prepare for your application and maximise your chance of approval.

A business loan can be a path to growth for a lot of small businesses. However, many business owners find the process overwhelming due to the number of options on the market and the amount of preparation required.

1. Speak to an expert

A business loan is a major obligation and can have the ability to make or break your business. Before applying for any type of loan we recommend speaking to an expert to ensure that it is the right option for your business, and to maximise your chance of loan approval.

2. Prepare your documents

Having your paperwork in order is essential to obtain fast business loan approval. Your lender needs to see that you are able to cover expenses whilst repaying the loan, so official documentation is required to prove that the loan is not a risk. For sole traders and partnerships, you may also need to show that you can afford personal costs at the same time as repaying the loan.

The documents required depend on the type of loan, your business structure and the loan amount. However, in general you will need to provide:

    • 100 points of ID. A passport or drivers license and medicare card is all that is required.
    • Proof of business registration, such as company registration, registration of business name, trust deed or partnership agreement.
    • Financials statements for the last 2 or 3 years, showing steady revenue and expenses. These must be prepared by an accountant, and should include the balance sheet, income statement and cash flow statement at a minimum.
    • Last 2 or 3 years tax returns (personal and business).
    • Bank statements and details of any liabilities you may hold with other lenders.
    • Details and proof of ownership for any proposed securities. This may be copies of the certificate of title for a property or registration papers for vehicles and equipment.

3. Understand your income and expenses

The lender will look closely at your income and expenses, so it’s best to take the time to understand where your money comes from and how it is spent before you submit a loan application. In the light of the Royal Commission lenders have become very conservative, and you may need to answer some specific questions about your spending habits.

4. Know what you’re looking for

If you’ve never taken out a business loan the options can be overwhelming. Lenders offer different products that are more suitable for some circumstances than others, so reading through their website and looking at the available products will give you an idea of where to start. At Speedy Finance, we offer 4 different categories of business loans, and our business lending experts will be able to guide you to select the loan that best meets the business purpose.

5. Decide between a secured or an unsecured business loan

Different loans are offered as secured or unsecured. A secured loan means that you offer an asset (eg. a property or cash deposit) as collateral, which can be claimed in the case of loan default. Secured loans usually have lower interest rates due to the lower risk for the lender. Unsecured loans are more difficult to obtain approval and often have higher rates, however can be a better option for new businesses or those that do not have equity in existing assets. Some loan types (eg. asset finance) allow you to obtain funding over an existing asset, so speak with your lending specialist to determine whether you may be eligible.

If you’re interested in taking out a business loan to help grow your business or finance an asset, get in touch with your local Speedy Finance business lending expert to see what we can do for you.

Ellie Shedden