How to Prepare for your First Business Loan
Making a financial commitment to your business through a business loan can be a huge leap for small businesses. At Lendfin, we have helped hundreds of small businesses grow by securing the right loan for them. Here are the 5 steps to take to prepare for your first business loan.
1. Get your paperwork ready
Having your documents in order is essential in getting an easy business loan approval. You will need to be able to prove to the bank that you have steady income and will be able to service the loan through your business. 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 show:
- Proof of personal ID. Generally a passport or driver’s license and medicare card will suffice.
- Proof of business registration, such as company registration, registration of business name, trust deed or partnership agreement.
- Financials statements for the last 2 years, or even better for 3 years. 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 of any proposed securities, such as copies of the certificate of title for a property or registration papers for vehicles and equipment.
2. 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.
3. 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 when you visit. At Lendfin we have relationships with multiple lenders, and our experts can help you select the best loan for your business.
4. Decide between a secured or an unsecured business loan
Depending on the type of loan, you may be able to choose whether it is secured or unsecured. A secured loan means that you offer an asset (eg. a property or cash deposit) which can be claimed in the case of loan default, however they usually have lower interest rates. Unsecured loans are far more difficult to get approved and generally have high rates that offset the bank’s risk of lending.
5. Speak to an expert
Mortgage brokers are usually the best option for first-time business borrowers. Not only do you get access to a range of lenders instead of just one bank, they have also worked through many unique business situations and know how to present your case for the best chance of loan approval. The business lending experts at Lendfin can help you to choose the most appropriate loan structure and guide you through the lending process from start to finish. Contact us for a no-stress experience and get the funds that your business needs to grow.