4 ways to improve your chances of business loan success

Securing that extra bit of funding needed to hire new staff or purchase a new piece of equipment could mean the world to any small business looking to take things to the next level. 

But while the benefits of a business loan may be clear, successfully navigating the application process and being approved for one can be a different matter. 

According to research in the Reserve Bank’s Access to Small Business Finance paper published in 2018, around one in five Australian small businesses reported finding it ‘relatively difficult’ to access finance. 

Among the biggest roadblocks inhibiting businesses were access to unsecured funding (e.g. funding that doesn’t require property as collateral) and the ‘lengthy and onerous’ application and approval process. 

While collateral may be necessary to secure a bank-issued business loan, Mozo Banking Expert, Peter Marshall, encouraged businesses to assess all of their available options when looking for funding. 

“Security can certainly help when applying for certain loans, but that security doesn’t have to be property. If you’re looking for a smaller loan you may be able to use a vehicle as collateral instead,” he said.  

“Alternatively, it may also be worth comparing other options like an unsecured business or personal loan, invoice financing, or even a business or personal credit card depending on your needs.”    

So is there anything small businesses can do to better prepare for the application process and improve their chances of getting approved for a business loan? 

To provide a helping hand, online lender Moula has pulled together some handy checklist tips to assist businesses preparing for the application process.

1. Clarify your purpose and funding neeeds 

Before applying for a loan it may be useful to really cement the idea or purpose of the loan in your head. Do you need one to help improve your cash flow, or do you need finance to pay for a  crucial piece of equipment? You’ll also what to determine just how much it is you want to borrow

2. Do your own figures 

Working out how much you want to borrow is one thing, but doing the figures to ensure that you can afford the loan and that the loan is going to be a useful return on investment, is another. Moula says that it’s also important for businesses to factor in costs beyond the interest and fees you’ll pay on the loan. For example, any related expenses such as the cost of installation or transport for any new piece of equipment. 

3. Ensure you meet the minimum criteria 

Like any loan, there may be minimum requirements you need to meet in order to be eligible for a business loan. Having an idea as to whether you’ll meet these requirements could save you time and effort and avoid you having to make an unsuccessful application. 

Some typical requirements for businesses include a minimum trading period (e.g. at least 6 months), a minimum turnover (e.g. at least $5k a month), and ensuring that you can provide the adequate security (e.g. property) if you’re applying for a secured loan. 

4. Assemble your documents 

Even if you’re applying for a business loan with an online lender, there are still pieces of information you may need to provide. According to Moula, you may need any of the following depending on whether you’re applying through a bank or an online lender.  

• Online Lenders: If you’re applying through an online lender like Moula you’ll likely need to provide basic information like your ABN or ACN, as well as access to online business data to provide a picture of your financial position.     

• Banks: If you’re applying through a bank then you may need to provide financial and bank statements, proof any company directors/shareholders income, a business plan and identification like a passport or licence (for new customers).  

Ready to get started comparing business loans of your own? Check out some of the great offers including Moula’s in the table above, or head over to the Mozo business loan comparison hub for even more deals.