Preparation is key when applying for a business loan; before you approach a lender your business should be in the best position to seek finance. Here are some steps that can help increase your chances of a successful finance application.

1. Keep your financial records accurate and up-to-date

Maintain balance sheets, profit and loss statements as well as tax returns. Lenders will most likely want to see your records from the past two years. Consider using new cloud based software packages such as Xero or MYOB, that can make it easier to apply for loans online. Don’t worry if your business is still using desktop accounting packages such as MYOB AccountEdge or AccountRight, you’ll be able to use these records too.

2. Keep payments up-to-date

Not only will this help maintain a strong credit rating, it also encourages positive cash flow- both of which increase the possibility of loan approval. Lenders need to feel confident that you’ll honour your loan commitments. By paying your accounts on time, you’ll be in a better position to successfully apply for a loan.

3. Put together a business plan

Lenders want clear information on how your business will make money and how you’ll repay the loan. A business plan should include goals and objectives of the business, as well as the actions that will be taken to achieve these goals. It should also include past, present and predicted performance of your business, with cash flow projections.

4. Think about how much you need to borrow

Carefully maintaining your financial records will help you decide how much you need to borrow, but more importantly - how much you’ll actually be able to repay. To avoid unnecessary pressure on your working capital, you should also consider the cash flow of your business and the best way to structure your repayments.

5. Decide if a secured or an unsecured loan is right for you

Secured loans generally come with lower interest rates, higher borrowing limits and longer terms. These benefits are offered in return for collateral such as machinery, cars and or property.

An unsecured loan, like NAB QuickBiz, has a higher interest rate but provides an instant decision on your application and requires no collateral as security. It can also require less administration to apply, as you’re able to link to your accounting software to show the position of your business rather than obtaining valuations and paperwork showing ownership.

6. Speak to an expert

Finally, remember to include your business advisers, such as your NAB Small Business Banker and your accountant in your cost-control programme.

Accountants typically deal with many businesses and are in a strong position to help you identify and monitor ‘cost culprits’ and suggest ways to lower costs and improve business profits.

Important information

The information provided in this article is intended to be of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on the information in this article, National Australia Bank Limited (ABN 12 004 044 937, AFSL and Australian Credit License 230686) (NAB) recommends you consider whether it is appropriate for your objectives, financial situation and needs. NAB recommends that you seek independent advice before acting on any information in this article.

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