7 tips for securing a business loan
Securing a business loan in Australia isn’t necessarily difficult but knowing how to navigate your way can be the difference between success and failure.
Banks and other financial institutions offer a wide range of business finance options, from commercial property loans to simpler options such as letters of credit, overdrafts and lines of credit. Here are some tips on how to improve your chances of success.
- Work out what is realistic
Find and compare credit options based on the amount of money you need to borrow, how you want it supplied and the type of security you want to provide (residential, non-residential or none at all).
- Do your research
It’s not only okay to shop around for the best conditions for you and your business, it’s expected. So the next step is to speak to an MFAA accredited credit adviser, who can help you work out what loan type and lender are best for your business and you. Credit advisers work with clients to determine their borrowing needs and abilities, select a loan suited to their circumstances, and manage the process through to settlement. They also do a lot of the research and paperwork; they have access to a wide range of loans and are experts in the area.
- Have a credit history and make it good
Lenders are looking for two things when it comes to your credit status: an existing credit relationship and a relatively clear history. If a borrower already has an existing loan which they’re servicing on time, they are much more likely to be successful. Of course, there are options for those who are either credit impaired or just don’t have a documented credit history, and a credit adviser can help clarify these.
- Actively show how risk will be minimised
Demonstrate how you will lessen the risk to you and to the lender.
- Be prepared
For your first meeting with your credit adviser, have up-to-date paperwork and tax records, make sure you’ve done your research and have a fair idea how much you want to borrow and how you plan to spend it. You should also know your total worth, listing your assets and liabilities.
- Have a plan
Lenders like to see a business plan that shows you know what you want to achieve and have a clear idea of how you can achieve it.
- Provide more than one exit strategy
Lenders want to know how they’re going to get their money back and some want up to three scenarios for what is called the ‘exit strategy’.
To give your business the best chance of success, talk to a FinanceCorp Finance Manager about finding the right commercial financing options for you.