Applying for a small business loan can be intimidating for some local Australian entrepreneurs, especially if you’re borrowing for the first time. Therefore educating yourself and researching your options will help you make the right decision for your business. Today, we lay out the key things you need to know about getting a business loan. This will serve as your 7 step guide to easy business loans!
1. Applying for an easy business loan
When you apply for an easy business loan, ideally you should ensure that you are prepared with all relevant business financials and records up to date and ready to go. The lender will examine the viability of your venture. The lender will also decide what type of financing you will qualify for, based on the information you have provided. Generally, the better your records the easier it is to get approved.
2. Get ready for application and lender approval
Deciding you need a small business loan is just the first part of the process. There are many steps along the way that also need your input. It’s not like “I need money, I’ll take whatever they’d give me” kind of thing. Getting a business loan is a responsibility so you should plan carefully for each aspect. The major points to consider are:
• How much do you need to borrow?
• What type of business loan do you need?
• How long will you need the loan?
• Can you repay the business loan easily?
• What’s the interest rate?
• What are the ongoing fees associated with the business loan?
• What security can you offer (if it is required)?
3. Accessing the loan funds
There are a few different ways business owners can access the loan funds. One is through a line of credit or an overdraft. You should go for this option when you need to access the funds on a regular basis to or when you need a cash flow boost while waiting for your customers to pay for your goods or services. On the other hand, if you need to buy equipment or make expansion for the business, you might need the funds ‘upfront’ or a ‘fully drawn advance.’ This will allow you to have the entire loan amount all at once.
4. Variable or fixed rate finance?
Another important factor of a business loan is the choice of rate. Your choice will affect the overall cost of the loan, as well as the features included. When you opt for a fixed rate, the lender will take the risk when the interest rate rises. While when you go for a variable rate, you will be the one who will take the risk when interest rate moves.
5. Business loan terms
Loan terms are important because this will determine your repayments and how much interest you need to pay for the duration of the loan. You should determine the loan term based on your cash flow needs and what you can afford. Please take note that the longer you hold on to the loan, the more interest you will pay.
6. Business loan security
Business loans can be secured or unsecured. Security or collateral can be different types of assets such as commercial or residential properties or business assets. Remember that when you go for an unsecured business loan, the interest rate is generally higher.
7. Business Loan cost and fees
There are certain fees associated with your loan and this may include application fees, exit fees, early termination fees, credit advance fees, service fees, etc. Make sure that you have compared your business loan options and calculated the fees involved in taking a loan.
There you have it: a quick 7 step guide to easy business loans!