Getting an approval for a small business loan can be intimidating. The gap is widening when it comes to the information financiers are looking for and what you may be able to provide.

Times have changed in finance, and you must prove you have a good business to prospective lenders.

Before applying for a loan, ask yourself the following:

  • What do I need the money for? Day-to-day cash flow, fitout, equipment or purchasing stock and inventory?
  • What type of loan is on offer and what’s right for me? Finance lease, chattel, rental, cash flow, secured, unsecured.
  • What is the minimum amount I need? Don’t borrow extra for a rainy day.
  • What term and repayment structure is best for me? Does it suit my cash flow if payments come out daily or weekly?
  • Are you registered for GST? Most lenders require a minimum of 6-12 months GST registration to be considered for a loan.
  • Are my business financials up to date? You typically need two years’ financials for a bank submission.
  • What low doc options are available to me and what are the low doc loan terms?
  • I have been offered a rental, does it suit my long-term business needs?

Consider these seven tips, which give you a better chance of approval.

1. Protect your credit score

Try to be in the acceptable range. The majority of lenders are looking at a 600-650 score, with the absolute lowest around 400.

2. Maintain good cash flow

Don’t apply for a loan once your funds are dried up. Cash flow loans are based on your current cash flow and they lend a percentage of that. It could be between 50-100 per cent depending on the lenders policy and industry you are in. Waiting until your cash flow declines will only reduce the loan amount offered to you.

3. Control your debt

Have your ATO tax debt under control, on arrangement or cleared where possible as many credit providers won’t lend to you if you have any outstanding ATO debt.

4. Declare a reasonable taxable income

Low income is good for tax, but not so good for borrowing.

5. Pay on time

Repayment habits to suppliers, credit cards, rent and telcos can all be seen with new credit bureau reporting effective September 2018.

6. Be wary of large credit card limits

It’s the limits, not the balances most lenders factor in.

7. Your bank statements define you

Lenders conduct in-depth analysis on spending habits. Missed payments, bounced payments, multiple withdrawals from one venue on the same day all impact on your chances of getting approved — what do yours say about you?

For more information, contact Commercial Capital Group on 02 9167 7910 or visit the website.