Applying for business loan

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Last updated on September 1, 2015

Preparing a well-researched and thorough business finance application is worth the time, effort and expense.

 

The immediate benefits of a high-quality loan application include that it will:

  • tell you where your business stands financially
  • draw a quicker response from a lender
  • more likely result in a loan package tailored to the needs of your business
  • help you obtain the most competitive interest rate and fee structure available.

Although different lenders will have different requirements, it is likely that you’ll be asked to provide some or all of the following information:

  • a short description of the business – history, past achievements, products and services, competition and market position, location and business structure
  • brief details of your experience and background including trade and business references
  • the outlook for your business and the industry in which it operates
  • the amount and purpose of the loan
  • whether the amount sought makes allowances for unexpected events
  • details of the equity you have in the business
  • a statement of your personal financial position
  • a balance sheet and profit and loss statement for the last three years
  • an analysis of major influences affecting operating performance over the last three years
  • a cash flow forecast for at least the next 12 months with a separate listing of the assumptions on which it is based
  • a listing of debtors and creditors dissected by age and amount outstanding
  • security for borrowing
  • names and contact details of key advisers to the business.


Are you a good risk?

Preparing your loan application and anticipating what you’ll be asked at your loan interview is easier if you have an idea of what the lender might be looking for. A business loan assessment usually considers the ‘Five Cs’ – character, capital, conditions, capacity and collateral.


Assessment factor

Issues addressed

Character

  • Honesty, reliability, trustworthiness
  • Integrity
  • Creditworthiness
  • Track record, if any, in business
  • Business skills and acumen

Capital

  • Financial strength
  • Quality of assets
  • Liquidity of assets
  • Debt-equity ratio

Conditions

  • General economic outlook
  • Conditions in your industry
  • Implications for profitability and debt-servicing capacity

Capacity

  • Ability to service the loan and meet other commitments
  • Ability of your business to withstand a setback
  • Your capacity to manage the business profitably

Collateral

  • Your willingness to pledge security
  • Nature and acceptability of security offered
  • Adequacy of security


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