5 Eligibility Requirements for Business Loans in Australia

By: Paul Raymond0 comments

It is a common practice for businesses to borrow money as a way of generating capital for their ventures. These loans will help cater for expansion needs or even assist in buying business equipment. According to APR’S monthly banking statistics, Australian lenders had an equivalent of $588.9 billion worth of loans and advances in their records to non-financial institutions as at April 2015.

Qualifying for a loan, however, is not an easy task. Just like growing a business, getting a loan approval takes time. This does not mean it is impossible. It is a financial decision that you have to approach with all the necessary information. The following tips will increase your worthiness for business loans in Australia and save you from constant rejections:


1. Have a clear credit history

Your credit history as a business or individual will determine if you get approved for a loan or not. You will negotiate better with your potential lenders if you know your credit standings. Your file should not indicate that you have arrears from other financial institutions that you were not able to repay. Lenders usually have access to this information; therefore, ensure that you don’t have outstanding debts as they will reduce your eligibility.


2. Search for lenders with the best rates

It is not enough to qualify for a loan. A good business loan should be one that does not eat into your cash flow. Go for lenders with the best interest rates and tailor your application to their eligibility criteria. Consider going for loans whose interest rates are offered on an open market since they give you the flexibility of negotiating further.


3. Understand every aspect of the loan

Understanding every aspect of the loan and clarifying your needs will help you get an approval much faster than you think. Identify the purpose of the loan, how you intend to pay and why you need the loan. Your financial advisor should come with a detailed explanation to answer these questions or find an alternative means of raising capital or find safer credit products that will not cripple your business.


4. Keep your documentations in order

When applying for a business loan in Australia, you have to produce supporting documents. These materials will give you leverage in the eyes of your potential lenders. A detailed business plan will show a comprehensive analysis of your business activities, cash flow, revenue projections and your competitors’ analysis. You should also include banking statements and invoices as they will help your lender ascertain the financial health of your business.


5. Let your potential lender know why you are credit worthy

At this stage, you have to up your negotiation game. Let your potential lender know your competitive advantage. Have a compelling reason as to why you qualify for the loan. The lender has to know how you will repay the loan, your intended customers, the collaterals you have to offer as security and most importantly why you need the loan.


It is crucial to keep in mind that banks or lenders will do a risk assessment before approving your loan application. A creditor will in most cases cushion himself from the business risk (the risk of potential loss accrued from loan defaulters)

Lenders will:

Assess the nature and level of your security – can it equally compensate your loan amount should you default?

Assess your cash flow – this assessment will help them know your ability to make regular loan repayments.

Want to know the business risk of qualifying you for a loan – business risk involves the risk associated with the inability to pay your loan ultimately. Your cash flow projections should project your ability to pay off your loan eventually.


What you need to do

Applying and getting approved for a business loan in Australia requires patience. Ensure that you qualify for all the eligibility requirements. Don’t be in a rush to borrow money instead have an arrangement in place on how you intend to finance the loan. The bottom line is that your loan should not eat into your profits. Use what is left to pay for your loan and not the income.

What’s Next?

Unsure if you qualify for a loan? Call us now and let us help you understand the basic requirements of qualifying.

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