How to Quickly Get Approved in Your Small Business Loan Application
An increasing need for small businesses nowadays is to have a convenient and efficient access to funds. Getting loans from different kinds of lenders may cause confusion and become tedious for some business owners, but there are tactics that can make the process run smoothly.
If you plan on getting a loan for your business, take a look at the following key areas that will increase your chances of approval.
- Background Check
The first step that lenders do before going through the process of approval is to get a summary of your business. This includes background, history, company names, registration date, industry, and a few facts on what the business does. For your company name, include the full official name of business as what has been registered.
As you submit identification card copies, they will also do a background check on you to see if you are a good fit as a borrower. It also helps when you present yourself well to the lender during the interview and submission of requirements.
2. Business Structure
Lenders need to know your business structure for them to determine who will be responsible for repaying the loan. The business structure indicates the sole trader, corporate trustee, trust or company. If you are not the sole trader of the business, the lender would need to know the names of the owners and directors. Information regarding the directors such as their directorship tenure and industry experience will also be required.
3. Business and Personal Credit Scores
Your credit history will be analysed to determine how you handle past finances. A credit score or credit rating sums up your credit report into one number, and it shows lenders how trustworthy you are as a borrower. Give an estimate of your business and personal credit scores when you apply for a loan.
Checking your credit score is also free and easy to do. You can check your credit score by using the national credit reporting bodies listed on the Office of the Australian Information Commissioner site.
4. Loan Amount and Purpose
One of the first few questions that the lender will ask you is your intention for loaning. Be clear and specific as to why you want to get a loan and how much you need. If you want fit outs for your business, document how much is needed for it. If you need a vehicle or equipment, give an authentic proof as to how much it is and where you’ll purchase it. Your loan request may include reasons such as improving cash flow, purchasing inventory, or paying staff.
5. Annual Turnover
It will also help you in the loan application process if you show the approximate turnover of your business. An easy way to calculate annual turnover is to divide net sales or revenue by the average total assets of your company.
6. Additional Credit Facilities Being Used
Declare other types of loans or credit being used in your business. The lender will check if you have an overdraft, other business loans, or business credit cards. They may want to see how you’ll handle getting an additional loan, or that your finances and cash flow are good enough to repay the loan during a given period.
7. Tax Position - GST (Goods and Services Tax) and PAYG (Pay As You Go)
PAYG instalments are required of business owners who earn a certain amount of income. When you are registered for Good and Services Tax (GST), you report your PAYG instalments on your business activity statement (BAS). Lenders would need information regarding the amount of any outstanding tax liabilities, and whether your BAS lodgement is up to date.
Another documentation that lenders would require is ATO Tax Debt. If you’re in a payment arrangement with the ATO, lenders would inquire how much is your monthly payment to them. Discuss your ATO debt with a potential lender to know if this is going to affect your loan application.
8. Additional Information
Lenders may investigate further regarding other information on your business. There’s nothing to fear if you have good records. Be clear and honest as possible when your lender conducts the interview. As you prove the worthiness of your business, the application process will go without a hitch.
9. Paperwork Ready
Organizing your documents and proper record keeping can do wonders for your business. It helps you stay on top of all business dealings, as well as getting loan requests approved in no time. Take note of the following requirements and keep them at hand whenever you need to apply for a loan.
- Identification: may include driver’s license or passport.
- ABN (Australian Business Number): This is an 11-digit number you get when your business application is successful.
- Documentation for Loan Amount and Use of Funds: A clear view of how much you want to loan and how you are going to use it.
- Financial Statements: These may include Balance Sheet, Income Statement, Cash Flow Statement, and Statement of Retained Earnings.
- Bank Statements: Submit to the lender your latest business bank account statements in electronic form or hard copy.
- Business Plan: Banks will usually require this. It includes your business purpose, financial management, and other factors.
- Financial Management Plan: This showcases how you’ll manage your business finances, including cash flow and repayments.
- Proof of Personal Income: Secure a documentation on how much you earn every month, which can come from your business or other income streams.
- Credit Report: You are entitled to one free credit report every month from any Australian CRBs.
- Collateral for a Secured Loan: If you’re getting a secured loan, you’ll have to present ownership of a property or business asset that you can submit as collateral.
Take the fuss out of applying for a loan by getting an unsecured business loan. Unsecured loans in the market nowadays help you get generous loan amounts in low-doc options. Bizzloans can help you get unsecured loans with just an ABN, photo ID, and 3 months business bank statements. You also don’t need to secure a collateral, and you’ll be offered loan packages that suit your business needs.