Essential Details Required for Securing a Small Business Loan

Startups often depend on loans to kickstart their operations, and securing financing is typically seen as a necessary step for scaling up. While loans provide the funds needed, they also come with monthly interest payments. Nonetheless, there are ways to lower your loan interest rate by ensuring your business and credit are in good standing and by providing the necessary information.

Australian businesses can compare their small business loan options through iSelect. To get the most competitive rates, you must have the proper documents ready. Here’s what you need to apply for a loan:

First, understand your finances well so you know what loans you qualify for and avoid borrowing more than necessary. The more you borrow, the more interest you’ll pay. Preparing a cash flow statement can give you a clear picture of your financial status. Present this document to the loan broker and include proof of your statements.

If you’re a startup, you might also need a business plan, a business contract of sale, and a lease agreement. Place your cash flow statement at the end of your business plan.

To show proof of income, company shareholders and/or directors should use individual income statements. Provide an ATO Notice of Assessment and your two most recent individual tax returns. If you’re not a director or shareholder, you still need to provide your two most recent tax returns. Include income earned outside of your business as well.

Bank statements are another way to prove your financial status. Lenders can see your current bank balance. If you’re not a sole proprietor or part of a business entity, provide just your personal bank statements. For business entities, both personal and business bank statements are required, and they can be either electronic or paper copies.

When applying for a loan from a familiar bank, a driver’s license might be sufficient. With a different lender, you may need additional identification like a passport and birth certificate. Both cases require business documents related to your company structure, such as company registration, partnership agreements, or trust deeds.

For unsecured business loans, good credit is essential to secure a low-interest loan. In Australia, a good Equifax Score ranges from 622 to 725, and a score between 510 and 621 qualifies you for a loan. Aim for a score of 726 or higher to get the best rates. Scores below 509 typically won’t be considered by banks.