8 Steps To Qualify For A Business Loan

There are many ways business owners can access funds to boost their businesses.

Photo by Andrea Piacquadio, Pexels

(SALEM, Ore.) - Almost every business requires a significant amount of capital to get started. Many people can have great business ideas but lack the necessary funds to actualize them.

There’s no doubt that this is what has killed many dreams and left many entrepreneurs struggling.

But all is not lost. There are many ways through which business owners can access funds to boost their businesses. The problem is that some people are too afraid to take the first step towards looking for business funding.

There are several financial institutions in Australia that offer loans to both new and existing businesses.

Here are 8 steps that will help you to qualify you for a business loan:

1. Determine if you need a business loan or not

The first step towards qualifying for a business loan is to determine why exactly you need the loan. Do you want a loan to start a business or boost an existing one?

The reasons for getting a business loan should be clearly defined to help you choose the best financing option.

For example, if you need funds to start a business, there are financial institutions that specialise in that kind of funding. However, most lenders prefer working with already established businesses.

2. Start looking for financing options

As mentioned earlier there are several business loans available in the country. But sometimes getting a lender that aligns with your business needs is not easy. That’s why it is good to get a list of several lenders available and compare their terms.

You can call or visit their websites to get more details about their services. After that, you can compare different aspects of the loans and choose one that addresses your financial needs.

3. Understand your credit score

Credit score is one of the primary factors that lenders use to decide whether to issue you with a business loan or decline your request. As such, you should ensure that your credit history is in good shape prior to submitting a loan application.

But you don’t have to worry in case you have a poor credit rating. Some lenders will give you a loan if your credit score is on the lower end as long as you have a positive cash-flow. You may however pay higher interest rates compared to someone with a perfect credit score.

4. Update your business plan

Other than checking your credit history, you also need to check and update your business plan. Lenders will always want to understand important details about your business and the only way they can do that is through a business plan.

This is even more important to startups seeking capital. You need a business plan that is well thought out and able to convince a lender to offer you a loan.

5. Put all your records and relevant documents together

At this stage, ensure that you have all the necessary requirements for you to get a business loan. Although the requirements of every lender may vary, here are some of the documents that are normally asked for:

• Driver’s license or other proof of identity
• Your tax records and bank account statements
• Australian business number
• A business planning outlining how the funds will be used

Having all these documents and details ready will increase your chances of getting your loan approved quickly. All you have to do is to ensure that they are all in order.

6. Decide which type of business loan to apply for

There are different types of business loans being offered by different lenders. Each of these loans is designed to serve specific purposes.

For instance, there are loans meant for startups, some for adding stock while others for emergency purposes. You should, therefore, seek to understand each one of them and choose the right one.

7. Put your business accounts in order

You need to ensure that all your business accounts are in good shape. A lender will be keen to see how money is flowing in and out of your business. This will make it easy for them to determine the amount of loan your business can service comfortably.

8. Agree on the repayment terms

Last but not least, decide the period that you will be able to repay the loan. Do you want a short-term or a long-term loan? Most lenders offer both options. It will be up to you to decide on an arrangement that suits you so that you can apply for the loan terms that suit you best.

Writer Raymond "Ray" James is a sought after thought leader and an expert in financial and money management. He has been published and featured in over 50 leading sites and aims to contribute articles to help novice financial planners. One of his goals is to impart his knowledge in finance to educate and help ordinary people create and achieve their financial goals.