Apply for finance
Before you approach a lender, broker or investor, make sure both you and your business are in the best position to seek finance. Below are things to consider before you apply to help you be more successful in your application.
Prepare your business plan
Your business plan and its attachments must be well researched and concise, and need to include enough detail to motivate a lender or investor to finance your business. See our preparing or updating your plan page for tips on preparing your plan.
It's important to know your key financial figures even if you don't prepare your own financial statements. These figures include your current income, net profit, expenditure and future projections. If you aren't confident answering financial questions, its best to either practice answering these questions beforehand or bring along a business advisor or accountant who can help you answer them.
Know your limitations
Once you know what you want, you need to work out your limitations for finance and your ability to repay any money you borrow. Some questions to ask yourself about your financial situation
- Do you need the money up-front or on a needs basis?
- What is the maximum repayment you can afford?
- What is your Loan to Value Ratio (LVR)?
- If you need collateral, what assets do you have to offer?
- If you need a guarantor, who will be willing to guarantee your loan?
- How much equity do you have?
- What is the maximum percentage share of your business you are willing to offer investors?
Shop around for financial products
Its best to shop around and find out what products are on offer when seeking finance from lenders. Although there can be discounts for existing customers, you may find a cheaper option with more flexible terms elsewhere.
Dress to impress
A professional first impression sets the tone and shows you mean business. The way you represent yourself and present your business plan can both help impress lenders and investors.
Practice your business presentation
It's best to practice your presentation before you attend your interview with a lender or investor. This will help you appear more efficient, alert and confident. Be concise and specific when practicing your answers and deliver them in a professional and persuasive manner. You can role play an interview with a business advisor or accountant to build your confidence in answering the hard questions.
Before your initial consultation, speak to your lender, broker or investor and find out what information you need to bring. Some of the required information includes your business plan, key financial statements for the last three years (if available), financial forecasts, ratio calculations and personal financial information for each business owner.
Check the finance details carefully
If you find a much cheaper finance option that sounds too good to be true, find out why it's cheaper. Are the fees higher? Does the interest rate change at any point? Is it from a reputable finance provider? What happens if your LVR gets too high? It's also a good idea to run your options past a business advisor or accountant before signing anything.
Managing refusal of finance
Seeking business finance may not always lead to successfully applying and obtaining the finance. Read Manage loan refusal for ways of seeking feedback, making changes and potentially overcoming this refusal in the future.
What to do...
- Use our LVR formula on our analyse your finances page.
- Check the Professional registers for registered companies on the Australian Securities and Investments Commission (ASIC) website.
- See the MoneySmart website for a list of Companies you should not deal with.
- Contact your nearest Business Enterprise Centre for free advice and support.
- Seek finance in your state or territory.