What do lenders look for when you apply for a business loan?

Monday 22 February, 2021

Applying for a business loan doesn’t need to be daunting. Whether it’s your first application or your tenth, there is one simple rule you need to stick to – chat to your local broker.

Our dedicated commercial brokers have years of experience in all forms of commercial lending and will leave no stone unturned to find the right solution to achieve your business goals.

We also provide the option to work closely with your accountant to ensure you maximise your cash flow and tax savings.

If you’re having trouble securing a business loan, maybe you need to consider the 5 C’s.

Character – While oddly named, this generally refers to your credit score and credit history. Did you know that each time you apply for a loan and are rejected, it negatively impacts your credit rating?

Capacity – This refers to your ability to meet your repayments. It’s simple really – lenders need to look into your cash flow to ensure you’re able to make the required payments.

Capital – Although not a must, sometimes it can be favourable to put capital behind your potential investment. Often, you will find banks are more willing to lend to owners who have invested some of their own money.

Collateral – Offering additional collateral (or assets) gives the lender assurance when approving a business loan. These are also known as secured loans. While not a necessity, it’s an option if you need some extra help getting your loan over the line. In ‘home loan’ terms, this is similar to having a guarantor on your mortgage.

Conditions – The condition of your business – whether it is growing or sitting and what the funds are required for. It also considers the state of the economy, industry trends and how these factors might affect your ability to repay the loan.

It sounds complex, but we promise it isn’t. Planning ahead, obtaining the right advice and doing your research – simple!

Oh, and 1 more C…