Firstly, you will need to be able to prove that you can repay the loan and meet any other requirements that are specified in the loan agreement. This could include regular financial reporting to the bank and demonstrating that you meet and will continue to meet all your compliance requirements including the timely lodging of tax returns on time and tax payments.
Taking a bank loan will increase the financial risk to your business, so you need to ensure that you understand the terms of the loan and can manage that risk.
What is the bank looking for in your loan application?
- What is the purpose of the loan?
- How much do you want to borrow?
- When will the funds be required?
- How long do you need to borrow the funds for?
- How will the loan be repaid?
- What is the risk to the lender?
All lenders will consider what is commonly referred to as ‘The 5C’s’ of credit to assist in identifying the level of risk they will be undertaking. Click here for more information about the 5C’s.
Lenders also need to understand how your business operates, what you see for the future of your business and the financial results expected. Always include a current business plan as part of your loan application. You can download a business plan template from the Forms & Checklists section.