Obtaining finance for a business can be a daunting experience. It can also be a soul searching experience where you virtually need to lay your financial and future plans on the line. Lenders will not give away money frivolously so expect to have to provide plenty of information about your current financial situation, business plans and personal details. But thorough preparation and attention to detail can help make the process run smoother and enhance your chances of successfully gaining a business loan. It’s a great idea to use a finance broker – one with a lot of experience and access to a wide range of products for all types of loans, such as housing and cash loans – to help find the best solution for your situation.

Do your research

Don’t jump straight into the loan application process without first doing your homework, regardless of whether you are seeking finance for a new business or to expand an existing one. Check what information credit providers are going to require throughout the process. This can include your current financial status, a business plan and all the necessary documentation required by the lender.

Be financially sound

This is going to be the biggest factor in the lender’s decision-making process. Credit providers will want to see an income stream that can support the repayments, and not just for the past few months. Income tax returns for the past couple of years or BAS statements will be required. Also make sure your credit history is clean – this will show that you have had no trouble servicing other lines of credit. Don’t under-estimate how much detail you will have to go into. A lot of businesses don’t succeed, so lenders will avoid higher risks – it is not as simple as something such as gaining credit to place a bet on a hot horse racing tip.

Assets are important

Obtaining a secured loan is generally easier than getting unsecured credit. Lenders prefer secured loans because it means they have access to assets that can be used to repay the loan if the borrower strikes financial troubles. Applicants who have their own home, even if they are paying off a mortgage, will find they should have little trouble getting finance. But any kind of assets can be used – a car, boat or even a caravan.

Have a business plan

Lenders love to see how your business will be making money in the short to
medium term. This shows your ability to service the loan – basically, it provides them with peace of mind and shows that you are serious. A business plan should not focus on just the next 12 months. It should look at the next three to five years to give a good indication of the direction you are heading. If you are not sure what should be incorporated into a business plan, there is plenty of information online or contact a business mentor (who often provide free advice) or specialist business consultant.

Be honest

Above all, be honest in your loan application. Provide accurate financial information, both about your current situation, your history and your future plans. Don’t get carried away with grandiose ideas – stick to the facts and be realistic. A person of good character is far more likely to achieve a favourable income, so it can often pay to include a character reference in your application.