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A Guide to the Business Loan Application Process

Business Loan Articles > Article: A Guide to the Business Loan Application Process

Applying for a business loan can be intimidating to borrowers new to the process; however, the loan application process is fairly straightforward. Although the specific steps can vary from lender to lender, most business loan applicants will follow a similar process to obtain financing for their business.

Business owners will have a much easier time navigating the business loan application process when they know what to expect and are armed with the right information and documentation. Being prepared for the application process by having the appropriate documents available can improve your chances of being approved for the business loan and speed up the application process.

Step One: Speak with a financial adviser at the bank.
Having a one-on-one discussion with a financial expert can help borrowers quickly identify what types of business loans or line of credit their business is eligible for and which will suit their business' unique needs. The financial adviser can also help the borrower estimate how long it will take to obtain funding, which is important if the borrower needs to secure financing within a specific time frame.

Step Two: Apply for the loan and provide required documents.
Once borrowers have determined what type of financing is appropriate for their business needs, they will fill out a loan application and provide the necessary verification documents to the bank, including a business profile. In general, the business profile should include: the type of business, the company's annual sales, the total number of employees, a profit and loss statement, information regarding the length of time the company has been in business, and details about recent ownership history. If the loan being applied for is a start-up loan, the owner will also need to provide his or her business plans. Some lenders may also require personal financial statements and business financial statements for the preceding three years. If the loan being applied for is a secured loan, the borrower will also need to provide information about the collateral being offered as security for the loan. Collateral can include personal real estate, property, business equipment, accounts receivable, inventory and supplies, or business real estate.

Step Three: Wait for the bank to verify documents and check the borrower's credit.
Once all required documents have been submitted, the lender will then verify the authenticity of each document. They will also review the applicant's credit file, credit rating, and background as well as the financial history of the business.

Step Four: Receive loan approval and sign the loan documents.
After assessing the applicant's documents, financial history, and business financial history, the lender will make a decision regarding the business loan application. If approved, the borrower and lender will sign all necessary paperwork, then the small business loan funds are disbursed. Once the borrower has received the funds, he or she is free to begin using the money as agreed upon.

How long does it take to get approved for a business loan?
The length of time it takes to approve a business loan varies depending on the chosen lender and the business' unique circumstances. Approval can be completed within a matter of days or can take several months. A financial adviser at the chosen lender can help borrowers estimate the length of time to get loan approval at the outset of the application process.

What types of business loan financing are available?
Most lenders offer both secured and unsecured loans, as well as business lines of credit to business owners. Although specific financing offers will vary, most lenders offer a variety of financing options for business owners. Below are a few of the most common financing options:

  1. Start up financing
  2. Business growth financing
  3. Inventory financing
  4. Motor vehicle financing
  5. Equipment and plant tools financing
  6. Business property financing
  7. Trade financing

How Much Can My Business Borrow?
The amount a lender will be willing to extend your business via an unsecured loan depends on your ability to repay the debt. Borrowers with high credit ratings will be able to borrower more funds, as will businesses that have a solid financial history.

How Long Do I Have to Repay?
Generally, unsecured business loans are set for a term of two to ten years; however, this can vary from lender to lender. The amount of money being borrowed will also affect the term of the loan. A business loan on a residential security can have a term as long as thirty years.

 

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