From keeping your cash flowing to expanding your business, there are various reasons why you might need extra finances to run your business. But you already know that getting a loan for your small business is not easy. So what do you do?
The secret to making a successful small business loan application is preparation. Before you begin to fill out forms, there are two important questions you should think about. The answers to these questions will determine how easily and quickly you’ll be able to secure the finances you need – as well as how much you will end up paying for the loan facility.
What Kind of Finance Does My Business Require?
This is dependent on how you intend to use the funds you get. A major buy such as property will require long-term finance such as mortgage. If you are experiencing fluctuations in your operation capital, you should consider an on-demand loan facility like a business credit card or overdraft. It is important that you use short-term finance for short-term need and vice versa – so that you get a high flexibility with repayment and do not end up paying more than you should.
All business finance options have their pros and cons. It is therefore a smart idea to seek professional counsel on the best suited finance option for your business needs.
Big Bank or Alternative Lender?
Many business owners and entrepreneurs automatically opt to turn to big banks for loan facilities – and many a times they end up disappointed. There are some advantages you get from borrowing from a big bank such as competitive interest rates and regulated loan products, that ensures you are safeguarded from unreasonable loan terms and behavior.
However, most Australian banks are very risk-cautious. This means that they mostly tend to lend to large businesses. Unless you can come up with several years of healthy transactions history and provide valuable assets as collateral, there is a huge chance you will not get the finance you need. Moreover, the loan application process for big banks can be tedious and time-consuming.
Alternative lenders, which includes a rising number of online ‘fintech’ organisations, tend to quicker when assessing applications and more flexible with their lending requirements – however, you should expect to pay more money because of higher interest rates and fees, especially if you opt for unsecured loan facilities.
There are also some 24-hour loan providers in Australia if you need some quick emergency cash.
What are the next steps?
Once you have made a decision on the lender and type of finance, you should take your time to do due-diligence on the various products that meet your criteria. Compare their rates, conditions and terms. Again, if these information is too sophisticated for you to understand, you can seek help from a finance advisor or broker who can help you find a suitable option.
Finally, you will need to gather all the supporting documents you need to make a successful application. These include detailed business plans, forecasts, full business financials, bank statements and any other relevant documents.
Make sure you have compiled everything nicely in order to make the application process easy and quick for your lender to complete.