If you own a small business, at some point of time you will require a business loan either to expand or to keep things running smoothly. There are numerous types of business loans available in to businesses in Melbourne today, which of course come with varying interest rates and repayment options.
Even though your business might be small it still takes the same time and effort to establish, as would any other business. That is why when you are planning to grow, getting the right small business loan in Melbourne with the correct procedure is one of the essential things to increase your chances of success. However, with the variety of options that the market is offering along with the eligibility criteria that is required, it can be a confusing and overwhelming experience to pick the right fit.
So, to make things easier for you, here are a few things that you should know before you go ahead and try securing a small business loan.
#1 What is your Business Credit Score?
As in the case of any other loan, when you apply for a small business loan, your business credit score is one of the main factors that will be considered. That is why, before you go ahead and apply for a small business loan it is a good practice to know your credit score. To do so, you can request for a personal credit report from your bank or get it online so that you can check for errors like a late payment. If anything like that happens contact the credit bureau and the company involved to resolve the issue.
You stand a chance to get the loan with an attractive interest rate if you have a high credit score of above 700. For example, if you need to get a commercial loan under $100,000 you can expect to pay a competitive interest rate. If in case you have a credit score 600 to 700 point you might be able to get a small business loan, however at a higher interest rate. If however, your score is lower than 600 points you may find it difficult to get a loan easily. Yet it is still possible if you try. Our business lending specialists can assess your situation and guide you through the complete process.
#2 How Much are the Fees?
Before getting a business loan you need to know if there are any upfront or ongoing fees that you need to pay to establish the loan. These two costs along with interest charges, can make a significant impact on the overall cost and affordability of the loan. Hence, ensure to compare and find the most competitive offering from all lenders for small business loans.
#3 Why Do you Need the Loan?
This is an important question that you need to ask yourself before taking a loan as it will decide how much you need to borrow for the business and how much you can repay. So, go ahead make a plan and decide whether you need the loan to expand your business, to buy equipment, or to setup a new location. If you are unsure about how much cash your company needs, meet with an adviser or an accountant before approaching any lenders.
#4 How Much Do You Need (or Can) to Borrow?
This is something that you must understand. Just because your business stands eligible to borrow a huge amount of money, it does not mean that you actually need so much, even if lender says so. You should not borrow more than you can repay or vice versa such that it does not benefit your business at all. Do some cash flow projections to figure out how much you can afford in repayments and some estimates on how much you’ll need in total to know your borrowing power.
#5 How Does the Process Work?
The loan process may be complex to understand. Sometimes when you apply for a small business loan the chances are that it might not get approved for many reasons. If your loan request is turned down due to poor credit you can take the time to improve your credit score and then seek a loan at a later date. It is also recommended to present prepare and submit a well drafted business plan to support your loan application. If the loan process is still a puzzle to you can talk to your business loan advisor for advice on the same.
Conclusion
When it comes to securing a business loan, the entire process can be a challenging one. Your business must be financially sound to obtain a small business loan. Other than that lenders may also require you to include a statement of collateral as a security against the business loan, such as commercial or residential property. You should also know that if your loan is unsecured, it will come with a higher interest rate. So, if you are looking for a small business loan but are unsure about getting your way around it, talk to a financial expert and discuss the different business loan options so that you can find one that is well suited for your business.