Important Steps When Applying For An Australian Business Loan
Business loans come in all shapes and sizes. There are lots of great reasons why you might be interested in applying for a business loan. You could be looking for startup financing just to get your business going. Or if you have an existing business, you may need to improve your production processes. Some companies need extra financing to increase their inventory at times of peak demand. Still others are looking to buy new equipment or purchase business property.
Your first step before you apply for an Australian business loan is to make sure you’re getting the right kind of business loan. Do you just need short-term financing or are you looking for long-term money? The most popular solution for short-term financing is business overdraft protection. It’s perfect for dealing with unforeseen expenses that may deplete your working capital. Your eligibility for business overdraft protection and the line of credit you can obtain depends on what security can offer and your business’s ability to repay.
Long-term financing is most often sought for business expansion, construction or equipment purchase. Most longer-term Australian business loans have a repayment period of one to five years.
You should begin by deciding what you will use the financing for and exactly how much money you need. This will help you determine the type of loan you want. Your next step will be to determine the best place to obtain financing.
To be fully prepared to apply for an Australian business loan, you’ll need to put together complete, up-to-date information about your business. Specifically you’ll need a current listing of your assets, liabilities and equity. Unless your business happens to be a one-man operation, this is something you’re going to need to get your accountant involved with. The lender probably won’t be impressed with notes on a napkin.
In addition to the standard business financial documents, you will also need to prepare cash flow projections. They communicate how money flows in and out of your business. Your cash flow projections should cover at least the next 12 months. Even if your income and expenses are variable, they normally even out over a year’s time.
Once you have all your information together, it’s time to contact your chosen lender and get an application. Depending on the lender and your location, this may involve picking up a paper application from a branch office. Many lenders now offer online applications for Australian business loans.
In most cases, the lender’s application and the business documents mentioned above will suffice. But in some instances, especially if you’re borrowing a large sum of cash or want to put it to some unusual purpose, the lender may require a more detailed loan proposal. This may be similar to proposals made what you started your business and could require an updated business plan.
If you’re self-employed and you wish to apply for an Australian business loan, special rules that make things a little easier may apply. If you or your business have an indigenous connection, or if you’re looking to finance entry into the import-export market, the Australian government provides special business loan opportunities.
Here are a few extra tips to keep in mind when you apply for an Australian business loan:
* Even though the low monthly payments might be attractive, you should avoid loans with balloon payments. There are no guarantees you’ll have this extra sum of money when it comes due at the end of the loan.
* Beware of loans with negative amortization. If you pay less interest than is being charged, your balance will actually go up.
* Never agree to a loan that includes prepayment penalties. If things go exceptionally well and you want to erase your debt, there’s no reason why you should pay extra for the privilege.
Finally, when you receive your Australian business loan, read the entire loan document before signing it and never, ever sign a document with blank lines that can be filled in later.
The health of small businesses is vital to the health of the entire economy. For this reason, lenders are generally supportive when you apply for an Australian business loan. It provides you with the cash you need and it’s profitable for the lender is well. In the end, your employees and the economy in general also benefit. It’s one of those rare situations in which everybody wins.