As a business owner, you may be able to use a loan to grow your business or ease cash flow issues. But before you can do that, you must get through the application process.
There are all sorts of reasons why you may want to apply for business financing.
You may have short term cash flow issues that you need to rectify.
Or, you may need to replace a broken piece of equipment that’s vital to your business.
In the case of John from Sydney, he wanted to grow the business. His story may be like yours:
Over the course of three years, John worked hard to develop his reputation as a top-quality plumber. And his efforts paid off. In fact, he developed such a stellar reputation that his business attracted more customers than he could handle.
He needed to expand. John needed to bring some new technicians on board, as well as purchase equipment for them. Unfortunately, he didn’t have the capital needed to undertake this expansion.
So, he applied for a business loan.
After getting his application approved, John could expand his plumbing business. Now, he’s able to meet the demand that comes from providing quality work.
Whatever your reasons are, you know that getting a business loan isn’t as easy as just asking for one. You need to complete a business loan application as part of the process for being approved for the loan.
The good news is, you don’t have to go through this process with no idea of what’s coming next. Regardless of the types of business loan you choose, you’ll generally follow the same set of steps.
Step #1 – Figure Out What You Want From the Loan
Before applying for a business loan, you need to know exactly what you’re going to use the loan for. All lenders will want to know the specific purpose of the loan. They’ll also want to see that you have plans in place for maximising the use of the loan amount that you ask for.
This means you need to be able to articulate your need for the loan. It may require you to compile your financial statements so that you can create a business plan that incorporates the loan, for example.
Step #2 – Review Your Options
You’re not limited to a single financial product when applying for business finance. Beyond standard business loans, you also have a line of credit or credit cards. There are also more specific forms of loans, such as equipment finance.
Each comes with its own requirements at the application stage. It’s crucial that you review each type of loan to figure out which one best suits your needs.
Step #3 – Check Your Credit History
Practically all lenders will check your credit history as part of their loan approval process.
Ideally, you’ll get ahead of them and check yours before submitting your application. This gives you a chance to spot issues that could lead to your application getting refused.
For example, you may have a couple of black marks on your report due to previous missed payments. Or, you may even have items in your report that are there in error and need to get removed.
Whatever the case may be, checking your history before applying will help. It will either give you more confidence in your application or stop you from making an application that wouldn’t get accepted.
Step #4 – Gather Your Documentation
At this point, you’re close to submitting your application. But before you do, you will need to gather any documentation that the lender will need from you.
This may include the following:
- Personal and business identification.
- Your most current business plan.
- Previous tax returns.
- Your profit and loss statements.
- Any forecasts you have, particularly those that may relate to what you’ll do with the loan.
Try to gather everything that you think the lender may need from you so that you can provide it upon request.
Step #5 – Filling Out the Application
This is perhaps the simplest part of the process.
Typically, this will involve filling out a form that asks numerous questions about you and your business.
Answer these as accurately as possible as the lender will require you to sign a statement. This statement says that all of the details in the form are accurate, to the best of your knowledge.
The key at this stage is to ensure you fully understand the loan that you’re signing up for.
Read the loan terms and conditions closely to confirm that there are no unexpected surprises. It’s also worth double-checking the basics, such as the loan amount and the loan interest rate. You should also confirm if you have a variable or fixed rate of interest.
After completing the application, submit it to your lender.
Step #6 – Wait for (And Then Receive) the Verdict
After submitting, you enter a waiting period. During this time, the lender will assess your application and supporting documentation. They will also examine your credit history. Using this information, they will then come back to you with a verdict on your application.
The length of time that you have to wait will depend on the lender. Major banks and other established lenders may take several weeks to deliver their verdict. Specialised lenders may be able to provide you with a verdict within 24 hours.
During this stage, your lender may also ask for additional documentation to supplement their research. Aim to provide this as soon as possible, if requested. Taking too long will delay the application process.
Are You Ready to Apply for Your Loan?
While some financing options may have other steps involved not indicated here, this is the general business loan process.
If you follow each of these steps, you should find the application process to be a smooth and straightforward experience.
Perhaps you feel prepared to make your application after reading these steps? If so, Unsecured Finance Australia offers several business loan products that may suit your needs.
Apply online today and you’ll receive a quick verdict on your application.
