Businesses may borrow money for many different purposes. Expansion, cash flow, property, equipment and assets, or many other worthwhile purposes. When looking at borrowing money for a business loan, it is important to not just go in prepared, but to also have a holistic approach to how the funds are going to help the business unit in the short term, long term, and for alignment to organisational goals and objectives.
Depending on the loan, will depend what financials you need. It is always helpful to chat with business loan brokers first. This will help you know what types of documents you need. Generally for a full doc loan, this would be bank statements, 2 years of financial statements, all tax lodgements up to date, and an accountant who can assist in qualifying documents. Low doc business loans may come with a slightly higher interest rate, but can be much easier to apply for, with less documentation needed. For Low Doc Business Loans this could be as simple as some ID documents, and bank statements. It can also depend on the loan requirement as a secured loan will also need details on the asset being financed.
The purpose of the loan will dictate many terms and details of the finance. A lender may not just look at the actual asset itself, where a secure mortgage is applied for, but also the general market conditions, the industry, and how the asset fits into the business type. Unsecured business loans will also have lenders considering these factors, but are generally less onerous, and for smaller amounts a simple substantiation of what the funds will be used for can suffice – without needing official quotes and expert statements.
Secured Business Loans
Generally, secured business loans australia will offer a lower interest rate, but may need full doc applications due to the usual size of the finance needed. Depending on the loan size, low doc options do exist, but the total amount available for financing, may be less than a full doc equivalent. For what can be secured, lenders will consider almost any type of asset, as long as it can be registered somehow even if this is just a serial number. Remember that the lender is taking security of the asset, so in the event of a default may have the right to acquire the asset, and still leave the borrower liable for any additional amounts owing, on top of the asset sale. You may also be able to utilise a current residential or other property with a cash out (equity release) or other way to utilise your current assets to secure business funding.
Unsecured Business Loans
Unsecured business loans are some of the easiest to apply for. There are still some strict criteria though, so these should not be seen as just easy money. Generally, a minimum time in business will exist, and bank statements will need to be cited as well as a list of any other business debts. The main benefit of a low doc business loan is not needing tax returns, and the ability to use the latest figures when calculating borrowing power. This can especially help for businesses that may have had a severe drop off during COVID shutdowns, but can show a good three plus months of recent revenue figures.
How To Apply For A Business Loan
Once you have worked out whether you want secured or unsecured, it is usually the best option to go speak to a business finance broker. They can assist in workshopping the application for you, discuss any potential shortfalls and how to mitigate them, and then work with the appropriate lenders to arrange the best rate and terms for your situation. A business loan broker should be able to not just assist with the loan prep, but also with the application through to settlement. Most business lenders can be very fast in supplying funds once approved, with most loans able to be settled within 24 hours once loan application has been approved, and any remaining conditions met.
Business Loan Summary
Appropriate business lending can be highly useful to a business, by being able to bring forward advantages from acquiring cashflow or assets other than would be possible (without finance). It is important to consider the finance as to the greater business whole and ensure the business will benefit from the finance sought both now and in the future. By ensuring these steps are completed, a business can find debt highly useful, and not fall into the debt traps that businesses can easily find themselves in. Talk to your business loan broker today for your free pre-assessment, and see how a business finance loan may benefit your organisation today.