7 questions to ask yourself before applying for a small business loan
Published on 2020-12-17
Category: Business Loans, Small Business Owners
Today, there are multitudes of loan options available to open a small business or to scale the current business. However, navigating through the maze of lenders and loan types is not less than a challenge. As a small business owner, you need to take care of various things when considering how to ask for a business loan?
The number of small businesses in Australia is increasing and so are the requirements for loan. However, there are several decisions that you need to make when you apply for a business loan. So, ask yourselves these seven key questions and get closer to your dream business loan.
1. How to ask for a business loan?
The purpose of your loan will determine whether you need a short-term loan or a long-term one. For instance, the need for a business loan to acquire a quick turnaround inventory is significantly different from the need for a new restaurant space. This means it will not make sense to ask for a fouror five-year term loan for inventory purchase that will be sold in a few months.
Therefore, the first and foremost decision to make is to determine the purpose of the loan.
2. How much money do I need from a business loan?
This is one of the most frequently asked but difficult to determine business loan questions. Just acquiring a lot of money is not the solution. There are costs associated with financing that should be carefully considered every time you plan to borrow funds. If the business loan will drive increased returns on the investment or in simple terms add value to the business, that is the correct way to determine the amount of money needed.
In other words, borrow the amount you need to fulfil the business need. This will also help in determining which lender to approach. In the past few years, many traditional lenders have been approached for bigger loans and bigger businesses. However, there are other lenders who specifically deal in small loan amounts geared towards small businesses. It also helps determine the loan term- whether short or long. For example, a shorter-term loan will have a higher periodic payment but lower total dollar cost and vice versa.
3. How to apply for a loan?
Take time out to carefully evaluate your prospects and understand all about business loans while preparing your application. It may not be a guarantee for the success, but it will surely improve your odds of getting a business loan. Understanding the minimum requirements of the lender will help you to narrow down the loan options that your business can qualify for before you decide to meet a potential lender. This will save you energy, time, and money in addition to avoiding the frustration of rejections.
4. How to get your small business loan approved?
The application process is generally simple and quick with most fintech lenders. They ensure you get your loan without hindering your daily operations. It is easy to get approval for a small business loan when you have been in the business for the past six months and making a profit.
5. How to check if you qualify for a business loan?
To qualify for a business loan,and successfully secure financing, you’ll need to convince a lender that you are capable of repayments.You need to have been in the business for a minimum of six months and have a monthly turnover of at least $5,000. Additionally, you should be able to service the repayments. Typically, a small business loan of up to $150,000 can be approved and funded on the same day. If your business has been running profitably and you have an enviable credit score, securing a small business loan can prove to be a cakewalk.
6. How much time does it take for a business loan to get approved?
In most of the cases, the entire process of loan application to approval takes few hours to a day. Most of the fintech lenders today use technology, which makes loan approvals faster. For example, bank transaction history can be analysed in minutes while the credit engines are predominantly used to automate the decision metrics.
When you apply for a business loan, prepare a cash flow statement to present an overview of current income, net profit, expenses and future projections. Most lenders will want to see your business plan before approving a loan. It is pertinent to know your financial position, business goals, and the ability to repay. Having assessed your needs, you should examine the best financial product for your business. For this, you need to analyse the varied options such as interest, costs, and the applicable terms. There are different tax implications for different types of loans. It is best to consult a qualified advisor or a reputed fintech lender to assess the offerings.
Before meeting the lender, you will need to collate the documents needed for business loan such as identity proofs, bank statements and ATO papers as applicable.
Get an expert advice, consult a qualified lending specialist today for an assessment and guidance onyour small business loan needs. Apply for a business loan with www.capitalboost.com.au, the best place for a small business loan.
Tagged in: How to ask for a business loan?, Apply for a business loan, Business loan questions, Small business loan, Loans for small businesses, Qualify for a business loan, Process of loan, Lending specialists in Australia
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