When you want to have your own business, it’s crucial that you have a battle plan laid out in order to make it work – and that may mean having a financial backup. Some of the most obvious measures are business loans, but that will also need some research. This article will tell you everything you need to know before getting a loan.
How Do Business Loans Work?
A business loan will work pretty much in the same way as a home loan. You receive a credit in order to sponsor your business, and you will generally have a fixed fee every month based on a particular timeline.
Some lending institutions may need security while others will not. Banks will generally ask for some security measures, but if you opt for some non-bank lenders, you may come across some lenders that will give you the money without the extra hassle. All you will need is a clear goal and the money to make the monthly payments.
What Makes Your Business Eligible
In order to make sure that you are able to pay the loan, lending institutions will need to find out the following details about your business:
- Age – The older, the better. Generally, you will need to have at least one year into the business; however, there are lenders that will offer you the start-up finances to get you going, so you may want to look those up as well.
- Credit – You may want to have your company credit checked before applying for a loan. If you are just starting the business, prior credit may be verified to see how you deal with your payments.
- Turnover – If you have a running business, financial institutions will look at the turnover of your company. Generally, if you have between $50,000 and $200,000, you should be eligible for a loan.
- ACN/ABN – Companies looking for business loans will need an Australian Company Number (ACN) or an Australian Business Number (ABN).
Once you clear these, you should be able to get a loan without any problems.
Things that Can Get Your Application Rejected
It’s easy to get business loans in Australia nowadays – as long as you stick to the rules. Here are, however, some common mistakes which can get your application rejected.
- Continuously changing the structure of your company: This may appear to lenders as a red flag. They need to see stability – something to ensure that you are on to getting fixed income.
- Not having an exact purpose: Going there with half an idea will not convince lenders to give you the money. They need to be sure how the cash flow will be, in every detail.
- Impatience is never good: Lenders have their own approval process, which are not going to change because you want them to “hurry up.” You can ask them about the length of the process, but don’t push it; it may cost you.
- Asking for too much: Many borrowers tend to get ahead of themselves and ask for too much money “just in case.” However, if you ask for too little, you may be required to get another loan. Try to figure out what amount you need that will be “just enough.”
There are many options for business loans in Australia. All you will need to do is make a short analysis of your own business and set a clear goal.