business
Finance

Business loan requirements –

what you need when applying for a business loan in Australia

Many business owners have asked, “What do you need to get a business loan?” To answer this question, we will examine several requirements you will need to fulfil when applying for a traditional bank loan. Although all of these won’t be required for all loans, it will give you an idea of some of the things you will need for the various business loans in Australia.

Before you apply for a business loan
You will want to cover a few things:

Amount and use of funds
Before you speak with a lender, you will need a clear picture of how much money you need and what you will use it for. Even if you’re not starting a new business, you might want to create a business plan for this purpose. Conduct research to support your numbers. If you need a piece of machinery for a manufacturing business, for example, get quotes from companies that supply this machinery. Remember to include all costs. In the machinery example, this would include delivery and installation.

Credit report
A lender will view your credit report, so it’s a good idea to know where you stand before asking for a business loan. Any late payments, defaults and judgements will make it difficult to get a business loan. You can get your credit report for free. Learn more about your credit report and credit score, and where to get yours.

ATO tax debt
If you are in a payment arrangement with the ATO, you are less likely to be approved for a business loan from a bank. Before entering a payment arrangement with the ATO, discuss your ATO debt with potential lenders to find out if this will prevent you from getting a business loan.

Collateral for a secured loan
If you are seeking a secured loan, consider what you will pledge as collateral. Loan security can include residential, commercial or rural property, and business assets. If you plan to use property as collateral, make sure you know what it’s approximately worth and what you owe on it.

Business loan requirements for bank loans:

Identification
When applying for a business loan, the bank will need to know who you are, including researching your background. For these reasons, having your ID – driver’s licence, passport, or both – is the first step in meeting business loan requirements.

Financial statements
There are four types of financial statements (Balance Sheet, Income Statement, Cash Flow Statement and Statement of Retained Earnings). In seeking a business loan, a bank will usually want to see the first three of these which show your assets, liabilities and net worth. In addition, you may be asked for other documents such as your most recent tax returns and business activity statements (BAS).

Proof of personal income
You will probably need to provide your two most recent tax returns and notices of assessment if you are a shareholder and/or director in a company.

Bank statements
The lender will want to see your latest business bank account statements either in hard copy or electronic format. Also, any other statements showing assets and liabilities, such as business savings and credit cards, will be required when seeking a business loan.

Business plan
A business plan is a common requirement for start-ups and new businesses seeking a business loan. Writing a business plan will require substantial time and research.

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