Growing your business takes commitment, dedication and critical thinking, but without adequate cash you won’t be able to go anywhere fast.
If you are a business owner, you know first-hand that having cash readily available can help you secure new work and amplify your business growth. It opens up the options to invest in things like hiring additional staff and purchasing stock and equipment.
A business loan and other business finance options can assist by providing you with the adequate funding to grow your business, enabling you to focus on strategies to grow your business whilst knowing you will be able to fund them.
Join us as we explore how to apply for a business loan and the different types of funding available for your business.
How to Apply for a Business Loan
Securing a business loan can be a crucial step for growth, whether you’re starting a new venture or expanding an existing one. Understanding how to apply for a business loan in Australia can simplify the process and increase your chances of success.
We have put together some simple steps to follow below:
Step 1: Determine Your Loan Requirements
Before you apply for a business loan, it’s essential to know what your business requires in terms of what finance product suits your needs, as well as the loan amount, what sort of terms suit you, how long you will need the loan for, and what security you will use.
Are you looking to purchase equipment, manage cash flow, or expand operations?
A well-defined purpose will help you choose the right type of loan and convince lenders of your business’s potential.
Step 2: Review Your Financial Situation
For those wondering how to apply for a small business loan, maintaining accurate financial records is crucial.
Lenders scrutinise your financial health when you apply for a business loan; hence, it’s important to ensure your business finances are in order. This includes having updated financial statements, a robust business plan, and a strong credit history.
Step 3: Research Lenders and Loan Options
There are a variety of lenders in Australia, from traditional banks to online lenders.
Researching different options will help you find the best terms and interest rates. Each lender may have different criteria for applying for a business loan, so comparing options is beneficial. Consider looking into both secured and unsecured business loans to find the best fit.
When partnering with an experienced business loan broker like Ledge Finance, we will complete this step on your behalf, providing you with a selection of finance options that best suit your needs.
Step 4: Prepare Your Documentation
When you apply for a business loan, you’ll need to provide various documents. These typically include:
Financial Statements
Now more than ever, lenders are taking extra caution when looking at your business’s historical financial position. Think of this as looking through your rear-view mirror – it includes your historical statements, rental incomes, and tax, including whether or not you have an ATO payment plan or ATO arrears.
Forecast
Along with your business’s historical financials, you will also have to demonstrate your future position, i.e. your forecast. Think of this as looking through the front window of your car – it involves analysing the business’s balance sheet, profit and loss, and cash flow, to understand the business’s cash and liquidity – creating visibility.
From this, the lender will review your asset, liability and net worth positions, as well as your income and expenses that will be used to determine if you will be able to meet your required loan repayments and other financial requirements.
Business Plan
When it’s time to approach your bank or lender, you should have a clear business plan, which can be in the form of a business overview presentation. This should be detailed and well-structured with appropriate information, such as business focus, organisational structure, products and services, financial history and forecasts, your long-term strategy and finance requirements.
Proof of Individual Income
Along with the business’s financial statements, lenders will want to know your personal income and if you are a Director and/or Shareholder of a company. More often than not, you will be asked for two or more recent personal tax returns along with an ATO Notice of Assessment.
Bank Statements
Bank statements are a crucial piece of information required when applying for a business loan, especially in the current lending market. You will be required to provide your personal and business savings along with any loans and credit cards you may already have.
Identification of Director/s, Shareholder/s and Trustee/s
You will be required to show identification in the form of a driver’s licence, passport, Medicare card, etc. Other documents, including your trust deed/partnership agreement/company registration, may also be required.
Having these documents ready can expedite the application process. Knowing how to apply for a business loan in Australia involves understanding these documentation requirements.
It’s important to note that the information required when applying for a business loan is not limited to the above, and it can change from business to business. Speak to your trusted finance partner upfront to ensure you have all the necessary details to apply for your business loan or business finance.
Step 5: Submit Your Application
Once you’ve chosen a lender, the next step is to apply for the business loan. Most lenders offer online applications, making the process more convenient. Ensure all information is accurate and complete to avoid delays. This step is critical in the process of applying for a business loan.
If you partner with a broker from Ledge Finance, we will take care of this step on your behalf.
Step 6: Await Approval
After submitting your application, the lender will review it and make a decision. This process can take anywhere from a few days to several weeks.
When partnering with Ledge, we will keep you informed on any timelines and updates we receive from the lender.
Step 7: Review the Loan Agreement
If approved, carefully review the loan agreement with your Ledge Finance Broker. Ensure you understand the terms, interest rates, repayment schedule, and any fees associated with the loan.
If you have any questions, ask your broker for clarification before signing.
Step 8: Receive Funds and Manage Your Loan
Once you’ve signed the loan agreement, the lender will disburse the funds to your business account. It’s important to use the funds as planned and manage your repayments diligently to maintain a good relationship with your lender.
The Different Types of Funding for Your Business
Now, onto the various funding options available. Below is a range of small business loan options to assist with your business growth. Not every option is suited to all businesses, and we recommend you seek professional assistance when looking for the best possible option.
Cash Flow / Working Capital Solutions
When it comes to growing your business and inputting your ideas, there are many challenges along the way and managing your cash flow is one of them. For example, if you pay your suppliers, wages and overheads on a fortnightly basis and it takes 45 days to get paid for a job, you need to have cash readily available.
There are facilities available to support these growth strategies, including:
- Invoice Finance
- Overdraft
- Line of Credit / Credit Cards
- Supplier / Trade Finance
These solutions will allow you to have the working capital (or cash) readily available to utilise on new projects.
Term Loan Solutions
- Business Loan for Funding of Significant Change in Business
This includes funding for:
- Management buy-ins and buy-outs
- Buy-out of existing shareholders
- Shareholder exits
- Merger and Acquisition Finance of synergistic businesses
- Capital raising and many more
Funding of significant change in your business is usually a complex mission with various alternatives available to finance, hence it requires thorough planning.
- Property Finance
Commercial or industrial property lending solutions are generally a necessity for business owners who want to buy their own premises. The benefit of owning your business property is that rather than paying rent, you own the property.
Other Business Finance Solutions
- Insurance Premium Funding
As a small business, you are required to have business insurance to protect you against things like workers compensation, theft and burglary, property insurance, professional liability and so on.
Insurance premium funding is a cost-effective method of funding (secured only by the insurance policies and directors guarantees) that allows you to pay your business insurance on a flexible repayment plan and keep working capital in your business.
- Equipment Finance
When it comes to equipment finance for your business, there are flexible finance solutions for everything from vehicles and machinery to emerging renewable energy equipment. The various Equipment Finance options available include:
- Novated Vehicle Leasing
- Finance Leasing
- Import Facilities
- Rental / Operating Lease
- Chattel Mortgage
- Hire Purchase
- Surety Bond
This is a viable alternative to a bank guarantee or level of credit. However, it is a very limited market and not all businesses qualify. Contact your finance partner to find out if you qualify.
Be Fully Prepared to Apply for a Business Loan with Ledge as Your Finance Partner
When it comes to knowing how to apply for a business loan, we recommend you speak to your trusted finance partner to find out what information is required to ensure you are fully prepared.
At Ledge, we facilitate a variety of business loans and various business finance solutions for a plethora of businesses across a range of industries. We understand your time is precious, so we ensure the process is as smooth and easy for you as possible.
To find out more, get in touch today, and we will be more than happy to assist.
