You need to clearly outline why you want the loan and the business benefit of getting the additional funding.
This is important for the lender as they may be reluctant to issue a loan if the purpose is for funding operating losses or a luxury purchase for the business owner.
Examples of the loan purpose include:
- Funding capital expenditure such as plant, equipment, vehicles, property and improvements.
- Increased working capital resulting from growth or to support increased stock holding.
- Replacement of existing equity with debt.
- Succession planning to provide an exit strategy for family members.
- Acquisition of another business or part of business
- Research and development or commercialisation stage
- Expanding distribution or developing new markets
If the loan is to buy an asset (i.e. equipment or property), or for a contracted service (i.e. IT support), provide the lender with all the important documentation you have collected relating to the purchase.
You should state when the funds will be needed and when you expect to be able to repay them. Businesses often underestimate how long it can take a lender to process the application and this may have a negative impact on your business if the funds are not ready when you need them.