Need some financial help to expand your small business, purchase some new equipment or manage your cash flow? Then you should consider applying for a business loan.
Business funding is a great way to finance the growth of your company and overcome temporary struggles. It can include overdrafts, credit cards, lines-of-credit and of course straight up loans.
There are different types of business funding including business loans, overdrafts and credit cards. However, they can be a complicated process to apply for, as lenders tend to ask for very specific information before agreeing to supply you with finance for a loan.
To speed up the decision-making process, and to increase your chances of approval, it is important to have all your paperwork in order.
Here’s what you will typically need:
Documentation Required For A Business Loan Application
When applying for any kind of business finance, usually you (or any partners, directors, or guarantors) will be asked to provide the lender with the following documentation.
Collectively, your financial statements will show your current asset, net worth and liability position. It will also show your income and expenses, which will then be assessed by the lender to ascertain if you can meet your current overheads, as well the sum of any regular repayments.
Typically, your financial statements will comprise both a balance sheet and an income statement. They may also include a statement of cash flow as well.
This document is looked at more favourably if it has been prepared by a qualified accountant and typically lenders will ask to see annual financial statements for the last two years.
In addition, you may also be asked to provide your latest tax return, and other statements from the Australian Taxation Office (ATO), like your business activity statements (BAS).
Furthermore, if any self-managed super funds (SMSFs) or trusts are related to your business you may be required to provide additional documentation that relate to them as well.
Proof Of Individual Income
As well as your business’s financial statements, if you are a director and/or shareholder of any company, lenders will also want to learn more about your personal income.
You will be required to provide them with your last two individual tax returns, as well as an ATO Notice of Assessment.
Also, if you earn other income that is not derived from your business then you should provide this information too. This could take the form of a rental statement for an investment property you own.
To assist the lender in gaining a complete overview of your financial position you may well be asked to provide them with bank statements. These statements would be for both business and personal income.
This will give them an understanding of your general living expenses and savings, as well as liabilities like loans and credit cards that you might currently have with other financial institutions.
If you have any offshore bank accounts you may need to provide details of them too.
Should anyone be acting as guarantor for the loan, they will also need to provide this documentation as well.
If you are planning to submit an application to a bank that you are not an existing customer of, you will need to provide proof of identity. This could take the form of a passport or driver’s licence.
Depending on your business structure you may also need to provide copies of your trust deed, company registration or partnership agreement.
Business loans can be unsecured. But depending on the type of loan you are applying for they may also require some form of security too.
Sometimes this might be in the form of property, but other times it might have to be a guarantee from company directors, especially when corporate borrowing is involved.
Further Documentation For Start-ups
For those seeking finance for a start-up business that has not started trading, or have been trading for less than 12 months, you will need to supply the lender with extra documentation.
This will include the likes of a business plan, a business contract of sale (if applicable) cash-flow projections and a lease agreement.
If your company has any trading history at all you will also be required to provide the lender with financials for that period, as well as any BAS statements you may have submitted, and the latest cash flow statement.
Even if you are an established business with a long trading history you may be asked to submit your business plan to give the lender a firmer indication of what you intend to spend their finance on.
This plan will need to provide a complete overview of all aspects of your business and should highlight everything from your product or service offering to an analysis of your competitors.
When applying for business loans and finance, the more information you can supply the better, as these documents can help your financial provider understand your business’ financial situation.
Should you be interested in submitting an application, please click here to learn more about business loans.