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- Step-by-step guide on how to get a loan for your business.
- How to prepare for a loan application
A loan application usually involves four steps.
- You must complete an application form
- The lender will run a credit check
- The lender will decide whether to offer the loan.
- If your application is approved, you will be able to decide whether or not the loan should be accepted.
Step-by-step guide on how to get a loan for your business.
Are you looking to grow your business with a quick, affordable loan? These steps will help you prepare your application to increase your chances of getting approved. We will walk you through each step of getting a loan for your business.
How to prepare for a loan application
To ensure you have the best chance of getting approved for a loan for your business, take a few minutes to organise all of your documents and plans before you start applying.
Your credit score for business is available.
When you apply for business finance, your credit report will be reviewed. Get a copy of it and verify that it is accurate. TransUnion and Experian are used for credit reports.
Loan applicants with good credit scores are usually eligible for the best terms. It is worth looking into ways to improve your credit score before applying.
You must ensure that your finances are in order
It is a good idea to settle any outstanding business debts before applying. A healthy cash flow is also a benefit, so call in any owing payments.
Examine your business accounts
We may need to review your financial statements as part of your application depending on your situation. Please ensure that they are correct. We may ask you to file new accounts if it has been more than 2 years since your last business account was filed.
These accounts will require you to present a detailed Profit and Loss statement as well as your balance sheet.
Consider how much and for what amount you will need to borrow.
You should be prepared to explain clearly what the funds will go towards. If the funds are for a general-purpose, such as extra working capital or other purposes, be prepared to explain how it will benefit your company. You may also need to borrow money to consolidate your business debts. For more information, see How to Consolidate Business Debt.
You should assess your financial situation and determine how much you can repay. This will show you are trustworthy and will allow you to respond confidently to any offers. You can find an online loan calculator that will give you an idea of what your monthly payments could be for the amount you are borrowing.
Take into account both time and financial costs
Consider how much time each product will take to manage, as well as the interest rates and fees when comparing business finance options. Variable-rate products, for example, will require more monitoring than fixed rates. Some lenders may also ask for check-ins or annual reports. This will result in a loss of revenue-generating activities.
1. Before you submit your application, gather all information
It is worth assembling all the information you will need to complete your application before you start so that you don’t have to rummage through boxes or scroll through files mid-form.
Information you will likely need to apply for small business loans:
- How much you are asking and why it is important
- Your business plan
- Statements from your bank
- Details of your losses and profits
- Your balance sheet
- your personal details
2. Credit history that is strong and maintained
Banks want to see proof that you have borrowed money before and paid it back on schedule. It can be beneficial to have a credit line or to borrow small amounts of cash. You should also remember that missed payments can affect your credit score.
Lenders can check your address and name by getting you on the electoral roll. These details are necessary to verify that you are the person you claim to be before they will give you any money.
ClearScore or Experian can help you keep track of changes in your credit rating and how to improve it.
3. Attention to every detail in your application
A single mistake or missing detail could make the difference between your loan application being approved or denied. Before you submit, make sure to read through everything again.
4. Do not submit multiple applications at once
Use a calculator to determine the amount of your loan and the interest rate that you might get. It could make it look like you are trying to find a loan approval from all the possible lenders. Speaking with a mortgage broker is your best option, this will prevent any issues. We offer free mortgage advice.
5. Find out if you are eligible for grants
It’s worth looking into grants available before you decide to borrow money for your small business. You don’t have any debt to repay when you fund your business.
To learn more about grants to small businesses constitute financial advice today.
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