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 In Finance

Obtaining finance can be challenging for a small business owner or tradie, with surveys showing that up to 80 per cent of Australian small businesses face cash flow difficulties at some point each year. If you need to access finance, here are 4 useful tips on how to make sure you are approved, not declined.

1. Dig up your documents

Traditional lenders will demand every piece of paperwork relevant to your business’ prospects of success, and often will not sign off an application without it. These may include a business plan, P&L, cash flow forecast, revenue projections, product prototype designs, insurance details, a detailed analysis of competitors and potential risks, and potentially also bank statements going back 3-12 months..

Online lenders like Prospa make life much easier for you, for amounts under $50,000 all you need to provide is your driver’s licence, the ABN for your business and the BSB and account number of your main trading account. For larger loans of over $50,000, often some basic financial documentation like P&L and cash flow are required to make sure your business is capable of making repayments.

2. Check your credit score

When applying for a small business loan with a traditional lender, your personal credit history is usually the most important factor. The banks will definitely obtain a copy of your credit report, so it’s crucial you examine yours before you apply, to understand what sort of negotiating platform you’re starting from.

Even if you think your record is clean, we suggest you check it to ensure there are no inaccuracies or nasty surprises. You may not be aware that every time you apply for credit and a credit provider obtains a copy of your report, an inquiry is added. Credit providers may take a negative view of a high number of inquiries made in a short space of time, which may affect your ability to obtain credit.

Under consumer law, you have the right to obtain your credit report and correct any wrong information. Contact any of these credit reporting agencies for a copy:

  • Veda.com.au
  • CheckYourCredit.com.au
  • Experian Credit Report
  • Tasmanian Collection Service.

3. Master your pitch

Obtaining a small business loan from your bank is essentially a pitch. You will need to sell yourself, your business, and your plans for the future while being both professional and passionate.

This can be daunting for those with little experience presenting or selling, so make sure you rehearse, and think of any possible questions or shortcomings that might be brought up. Consider all the potential negatives for a lender and how you might counteract them in your proposal. It pays to be ready with evidence that can back up your claims, so be sure to prove your ROI, or showcase your business growth in easy-to-read graphs and charts.

Fortunately, getting a small business loan from an online lender like Prospa does not require you to pitch. You will need to explain the intended use of funds, and Prospa will then satisfy itself you meet its lending criteria including whether your business has the cash flow to support repayments.

 4. Know your security

Traditional lenders usually require the borrower to offer an asset as security against the loan, in most cases a property asset, and less commonly other valuable assets like vehicles or equipment. Before offering up your family home as security for a small business loan, you should think carefully about the degree of risk and the consequences, and consult with those who may be affected, like your family.

If you are not comfortable with using your house as security for the loan, and cannot find a third party guarantor, then an unsecured small business loan from a trusted online lender like Prospa may be more appropriate.

Thanks to the growth of new, online lenders, getting a small business loan has become easier than ever before. And if you do need some funds for your business, contact Prospa – we have already lent over $190m to more than 8,000 small business owners in Australia.

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