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Jun 2015

How Do I Apply for a Small Business Loan in Australia?

June 20, 2015
Capify Australia

Australia, home to a rich culture and a bustling economy, is a land of opportunity. Any worthwhile business idea, when funded well and executed the right way, should have a very good chance at success. Of course, before you can start working on the nitty-gritty, you should have enough money to purchase equipment, space for an office, and hire staff. Getting a small business loan is your quick fix, but how?

There are different types of loans you can select from, taking into account the various kinds of businesses, business models and operational needs. Organisations that have bad credit or no collateral can also get a loan from a financial institution via alternative lending. The options are seemingly endless; but tread carefully, you should pick a loan that is best suited for the particular needs of your company, and from a reputable lender.

Bank loans and their requirements

Banks are secure sources of finance given that individuals, families and enterprises put money in them. Since they are the primary options for business funding, they offer a wide variety of loan packages for companies, covering the amount needed as well as the ability to pay premiums. Stringent rules and regulations come with bank loans. These institutions make sure that a loan applicant are able to pay the premiums on time and with minimal difficulty.

Having a business plan that thoroughly discusses the company’s operations, products, monetisation and ROI is a must when applying for a bank loan. The figures and graphic representations should be accurate and well-researched, applying to the current business landscape in the country. If you’re having trouble coming up with accurate projections, you can consult with a business adviser. Troublesome as it may be, a detailed business plan can woo banks and other potential investors to put money in your venture.

Apart from the business plan, banks and credit card firms take a long hard look at an applicant’s credit history and rating. The history notes down all the past purchases of a cardholder and their ability to settle premiums in a timely manner. This reflects how liquid a loan applicant is, so one who has a favourable credit rating stands a greater chance of having a bank loan approved. Those who have bad credit or no collateral are better off withother financing options generally.

Also be sure to prepare your financial statements, the goal is to prove to a prospective lender that you’ll have no trouble paying for the premiums.

Selecting bank loan packages

Once you’ve got your business plan and the credit details down pat,a slew of financial packages will be offered by the bank or any similar financial institution. These programs will typically differ in terms of the amount loaned, interest rates and premiums. Knowing your financial limitations is the ideal way to find the perfect loan package.

The first thing to consider is your current equity when picking a loan; having enough money on hand to make the business function at a basic level, at least, should come with more flexible options. For non-liquid startups, entrepreneurs can pick a deal that entails a rather upfront approach to funding, since the money will cover the basic necessities of the business. Banks offer such packages, including those that finance debts.

Do you have collateral?

For those who would need collateral, you should view the assets you currently have in your business, and identify those that you can offer to the lending firm. Banks put a lot of stock in security, sohaving collateral is deemed necessary in many cases. Find the time to properly appraise your assets or at least get someone to discern the valuation for each.

Not everyone, however can afford to attach current assets to a financial deal, thus paving the way for adeal with alternative lenders.

Alternative lending options

An entrepreneur who fails to qualify for bank and credit loans can still acquire funding. There are financial institutions, like Capify, that provide alternatives to traditional small business loans, catering to startups that need quick cash. The financial packages have simpler requirements, faster application times and innovative solutions to curb the impact of high interest rates on their clientele.

An easier way to secure funds is to explore an unsecured business loan. The interest rates in this program are higher than those associated with its more traditional counterparts. However the premiums are much easier to manage as they come as daily payments marked with relatively small amounts. In a lot of cases, people would rather hand out small amounts than disburse funds at the end of a payment period.

Another type of alternative lending is the merchant cash advance. Here, a business acquires a sum of cash which is paid through credit card sales. Like the unsecured bank loan, the interest rates are high, but the premiums are only paid for when a sale is made and the company receives income.

Applying for alternative lending is much easier than other types of loans. Pre-application, which allows the lender to evaluate applicants quickly, is done online, much to the convenience of interested parties. No business plan is necessary and those with bad credit or no collateral are welcome to apply. Normally, a qualified applicant already gets funding after 14 days.

Passing the eye test

Similar to applying for a job, an applicant should impress a potential lender with the way they present themselves including appearance, communication and a well-detailed presentation. Whether you’re talking to a bank, a credit company or an alternative lender, you should dress professionally and supply them with clear and concise answers in a confident tone.

What you aim to establish is trust from your potential lender. Keep in mind that a large sum of cash is involved and no one would want to hand it out to someone who does not have the potential to pay it back promptly. Remember, lenders are out to earn from the premiums.

Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.

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