Business Loan
Are you looking to start your own business or grow your existing venture? A business loan can provide the funding you need to take the next step. However, to be eligible, both your business and loan application need to be in strong shape. Ensure your business is financially stable, and your loan application is well-prepared to increase your chances of approval. At Avenstone, we cam help guide you through the process and secure the right financing for your business goals.
How do I qualify for a business loan?
When applying for a business loan, lenders assess several factors to determine your eligibility. Key elements include the amount you're contributing to the loan, your business experience, the type of business you operate, and the security property you offer.
Your chances of qualifying improve if you run an established business in a lower-risk industry, where financial failure is less likely. Lenders tend to be more cautious when considering businesses in high-risk sectors such as housing, mining, and construction. Government risk and reputation risk is also taken into account.
It’s important to note that there are no fixed rules for qualifying, as business loans are assessed on a case-by-case basis. For example, an inexperienced entrepreneur wishing to open a restaurant may face rejection — even with secured assets — due to the high-risk nature of the food industry and a lack of experience.
In contrast, long-standing businesses with a proven track record of strong income may have access to significant lines of credit, even surpassing one million dollars. Each application is unique, and lenders consider various factors to determine loan eligibility.
How Much Can I Borrow?
The amount you can borrow generally depends on the lender, the loan product and their assessment of your application.
Typically, you may be able to borrow anywhere from $250,000 to $50,000,000 with a business loan. However, business loans over $5 million to $50 million have stricter lending criteria.
Our mortgage brokers understand which banks assess business loans more favourably. You can call us on (03) 9566 7247 to find out if you qualify and how much you can borrow.
How do I get approval to my business loan application?
Even if banks are more flexible with business loans, there’s always a chance your application could be declined. To increase your chances of approval, it’s essential to be well-prepared before applying.
Lenders will want detailed information about your business's financial history. To set yourself up for success, create a comprehensive business plan that includes a profit and loss budget and a cash flow forecast.
Loan approval depends largely on how well-researched and well-presented your business loan proposal is. If your business is considered high risk, even with a strong foundation, your application may still be declined.
Given the complexities involved in securing a business loan, it’s crucial to have an experienced broker who specialises in commercial lending to guide you through the process. An experienced broker not only understands the nuances of business loan applications but also plays a key role in advocating for your case.
A strong working relationship between your broker and the bank is invaluable. A broker with a solid rapport with bankers can effectively navigate the credit department and ensure your application receives the attention it deserves. They will fight for your loan, leveraging their connections and knowledge to secure the best possible outcome. Having a skilled broker on your side can significantly increase your chances of success, ensuring your business gets the funding it needs to thrive.
What to Consider Before Applying for a Business Loan
Before applying for a business loan, it's essential to consider several key factors to ensure a successful application:
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Decisions to Make: Start by determining the loan amount, loan type, repayment period, and security property. Consider whether you need the funds upfront or on an ongoing basis. This clarity will help you find a lender that can meet your specific needs, whether it’s purchasing an insurance broking book, trade finance, or acquiring a financial planning practice.
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Planning and Preparation: Understand and be ready to present your key financial figures, such as current income, net profit, expenses, and projected income. Lenders favour applicants who are well-prepared and confident about their financial standing. Even if you don't prepare these figures yourself, having a good understanding of them is crucial.
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Lender’s View of Risk: Lenders assess multiple risk factors before approving a loan. These factors may include your business history, management risks, credit history, and your planning and financial skills. They will also consider your knowledge of the market and your ability to manage the business.
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Business Loans on Offer: Take the time to shop around and compare loan products from different lenders. Research the fees, interest rates, and terms of various business loans before applying. Consulting with a business advisor or accountant can be a great way to ensure you’re making an informed decision before applying for a loan.
Common Ways to Prove Your Business Income
To support your business loan application, lenders typically require proof of your business income. Some of the most common ways to demonstrate your income include:
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Financials: For established businesses, lenders typically require 2 years of financial statements and tax returns for both the borrowing entity and its guarantors, which may include directors and/or corporate guarantors.
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Interim Financials: In addition to your past financial statements and tax returns, lenders may also require interim financials to help assess your business’s recent performance and cash flow. These documents provide a more accurate and timely snapshot of your financial situation, which can improve your chances of loan approval.
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Projected cash flow statements: These help lenders understand your expected income and expenses. Particularly important if you are a start-up or purchasing a business.
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Bank statements: These provide a clear picture of your financial history and business performance.
Frequently Asked Questions about Business Loans
Are you needing a business loan? We can help!
Ready to take the next step in securing the right business loan for your needs? Book a free 30-minute discovery call with our expert team at Avenstone today. We’ll take the time to understand your business goals and provide tailored advice on how to optimise your financing options. Our goal is to ensure you get the best deal possible, and our team is committed to guiding you towards the right lender and solution. Click the button below to schedule your free call and discover how Avenstone can help your business grow and succeed.
Years Experience
20+
in Residential & Commercial Banking