How to Apply for a Business Loan

Tuesday, May 15th, 2018

If you run a business, you’ll understand the importance of cash flow and access to funds to help boost your business growth. For many business owners, that can be achieved best with a business loan, but without the experience of what it takes to apply for a business loan, many business owners can be rejected from finance applications and left disappointed and confused.

To help you understand business loans, a little bit of knowledge can help you build a better business.

Preparing to get a business loan

Lenders will ask for a detailed business plan before approving your application.

This document tells them the nitty-gritty about your business – and the direction you hope to take it – and gives them important information that helps them weigh up the risk factors associated with lending you money for your business.

When dealing with a loan broker, being honest and open about your needs can help them direct you to the lender most likely to be in a position to help you – a decision that can boost your chances for a successful business loan application. A thorough business plan must include a profit and loss budget and a reasonable and achievable cash flow forecast.

Boosting Your Chances of a Successful Business Loan Application

Before you approach a lender, it’s important to know what you’re asking for – and why. Be clear about how much you need to borrow – and what it will be used for.

Understanding the type of loan you need can be better explained by a professional loan broker and it is also important to be clear about how long you need the money for, in order to work out the best loan structure and repayment plan to help you minimise interest and keep your repayments to a manageable level.

Talking to your accountant is an important part of any business loan application. With their guidance, and the insights of an experienced business loan specialist, you can make an informed assessment about whether you can really afford to repay the loan – as well as service the interest and any other one-off or ongoing fees attached to the business loan.

Analysing what security you can offer the lender – and how this security may impact on the interest rate – is also something to factor in.

Rather than relying on online calculators to work out your potential repayments, make sure you also factor in this question:

What sort of access do you need to your borrowed funds?

(Answering this can determine whether an ‘at call loan’ is right for you. This is an overdraft or line of credit which gives you access to a defined amount of money (or limit) to help your business cash flow and maintain necessary business operations while you wait for your customers to pay for goods/services.)

Other loan alternatives include an upfront loan – also known as a fully drawn advance or term loan. This provides the complete loan amount in one go – ideal for people buying a new business or buying equipment to help grow a business.

Different types of loans have different interest rates and repayment requirements so be sure to have your lending specialist explain it to you before committing.

If you do intent to apply for an overdraft, be aware that:

Whether you settle on fixed rate interest repayments or variable is another discussion to have with your accountant and business loan broker – just one more reason to take any business loan application seriously and get the right advice from business loan experts who know the intricacies of the industry.

For business loan advice to help grow your business, talk to Loans Actually today.


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