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Applying For a Small Business Loan: Everything You Need To Know

Published on Tuesday, September 24, 2019

Applying For a Small Business Loan: Everything You Need To Know

The Simple Guide To Getting A Business Loan

Over the past decade, small businesses have been on the rise in Australia.

The formal definition of ‘small business’ as a general rule, is a business which is independently owned and operated and has a limited number of employees and relatively small revenue.

There are a reported 2 million small businesses across Australia, making small business owners a major contributor to Australia’s economy and an integral part of this country’s economic independence.

In fact, recent statistics from the Australian Government show a total of 4.8 million Australians working for small businesses in 2017 - up 66,000 or 1.4% on the previous year.

So, how does one go about securing the capital to begin implementing a business plan and launching a brand in 2020?

The acquisition of a small business loan by entrepreneurs who are keen to start their first or latest business venture can cause some confusion and frustration among loan applicants.

For the most part, applicants are concerned about two things when applying for a small business loan:

a). whether they meet the criteria for application approval

b). the lender’s interest rate

The former can be somewhat obscure, especially when the criteria can vary from lender to lender. Credit scores for example may differ, so it's important to stay on top of your credit score. As too can the documentation a lender requires an applicant to submit along with their small business loan application.

This article will cover the general information required by a lender when you next apply for a small business loan. As well as some things to consider when trying to start a successful business.

The Importance of Finding The Right Lender

Many lenders offer loans of up to $1 million and some can even offer same day approval for applications.

With such generous loans available, what would deter those with an entrepreneurial mindset from applying?

Well, the truth is that a large portion of small business loan applicants may have poor credit as a result of previously failed business ventures. There are numerous issues that can arise when both starting a business and running a business.

When an inexperienced entrepreneur runs into unexpected problems, oftentimes they are ill-equipped to overcome these problems while only using a minimal amount of resources. As more issues arise over time, these entrepreneurs may continue to spend more and more resources on resolving each one until the snowball has grown too large and pulled the business under.

For a small business owner or someone looking to own, finding a lender is as necessary for the success of the business as is the actual market for the business.

Basis For A Business Loan Review

Traditionally, a business loan is reviewed after the applicant submits as a minimum:

  • financial reports from the past two years
  • a business plan which includes a projected income
  • sufficient proof of collateral
  • current business owners will need to provide their Australian Business Number (ABN)

After this, the lender will review the required documentation specified and run a credit check on the applicant and if the lender is satisfied that the requested loan amount could be mostly paid off in the event the business fails the application would be approved.

However, there are a plethora of lenders who understand that there are many factors which contribute to the dissolution of a business and have subsequently adopted a ‘second chance’ attitude when considering the way in which previous business debt affects an applicant’s credit. Similar clemency is given to applicants who are looking to fund their first venture and may not have any prior business experience.

Many lenders now offer guidance to first-time entrepreneurs to help them start their careers.

Am I Eligible For A Business Loan?

There are several ways to apply for a loan depending on the type.

As a lot of lenders are willing to check out those who need funding.

To be eligible is very simple - most small businesses would qualify.

Shaun McGowan of small business financier Lend explains “with new lenders challenging the traditional funding suppliers, funding can be available as fast as the same day in certain cases. The barriers to capital are much lower than many people expect when it comes to fast, small business loans.”

Anybody considering starting a small business should still remain aware that their own personal finances can affect the success of a business. It is not uncommon for an entrepreneur to rely in part on their personal savings in the initial funding of small business and in its day to day operation.

In fact, it is almost expected that a person would use personal savings in the early funding of their business as a way to avoid paying more to a lender in interest.

With the big banks losing their monopoly over small business loans in fierce competition with online lenders, long-term interest rates for small business loans have been on a sharp downward trend and may even decrease further.

Are you ready to build your small business empire?

The modern-day small business loan application is no longer a hair-whitening experience, especially for those who spend some time doing their research on available lenders and have a rough idea of how much capital is required to get their business up and running.

With there being no shortage of small business loan lenders all offering competitive interest rates and allocating resources to support loan applicants, the turn of the decade has ushered in the era of the entrepreneur.

Where people once struggled to set the ball rolling on their business ideas, now lenders are available to help make those dreams a reality for anybody with the determination to build, create and innovate.

So if you’re considering applying for a small business loan to begin a new career path, there really is no time like the present to find a supportive lender to give your ideas and dreams a strong foundation.

With so many options available, what are you going to do today to kickstart your business goals tomorrow?

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