Since the Global Financial Crisis of 2007, borrowing for small to medium businesses has become increasingly more difficult.  However, the key is to know how it is done to maximize the chances of success and to get the best terms.

The following is a 5-step process you can take to maximize a successful application:

  1. Decide what you need the funds for. There are good and bad reasons for applying for a business loan.  Good reasons would include financing a piece of equipment, purchasing commercial real estate or finance for large seasonal variations in sales.  Bad reasons would include trying to finance ongoing losses or non-essential business assets.
  1. Decide how much you think you may need. Over estimating may have the lender questioning the owner’s credibility and requirements.  Under estimating can create working capital shortages.  You will need to substantiate your position with projected financials including Profit & Loss, Balance Sheets and Cash Flows.
  1. Be aware of your personal credit score. Even though you are borrowing for commercial reasons, lenders will still look at your personal credit score.  An acceptable score would be around 650.  However, lenders may look for 700 and above.  In addition, time in business is important.  The longer you have been in business, the more inclined the lender will be to approve the application.  At the end of the day, cash flow is what will count because this will measure the ability to successfully repay the loan.
  1. Now you will need to find a lender. This can be a daunting task.  This is where a Commercial Broker can be of great assistance to you.  They will do the research to find the most appropriate lender for your situation.  There are several alternatives including:
    • Commercial Banks
    • Non-Bank Lenders, and
    • Other Specialist Lenders
  1. Prepare the application and supporting documents. Once you and your broker have agreed on the most appropriate lender, the broker will prepare the application, add your supporting documents and most importantly the submission notes.  Then lodge the deal with the lender.  These submission notes can also be the difference between the success and failure of the application.  It is imperative that your broker explains your situation and mitigates and potential issues that the application may have.

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