So, you have decided that in order for your business to get off the ground and sustain the monthly operating expenses without using the revenue stream of the business, you need to apply for a business loan. This way, you will be able to establish a good financial record or account history while operating the business using the business loan proceeds.
While each bank or lending institution in Australia may require a different set of documentary requirements for a specific type of loan, you may start preparing the documents listed below as these are what most banks and business lending firms typically require for a business loan application:
This document will be the bank or lender’s reference when they process your loan application. Loan application forms from each bank and private lending firm may be formatted differently from one another but they should contain the following information which you need to provide on the form:
- Reason for loan application
- Purpose of loan proceeds
- Details of purchases and suppliers
- Existing or other business loans availed
- Details of other creditors
- Key officers of company or business organization
- Personal background including names used, previous and current addresses, criminal record, educational background, etc.
There are banks and lenders that require evidence of business or management experience or track record. This is usually held as vital for businesses applying for a start-up loan.
A sound yet easy-to-understand business plan is usually required to enable the lenders to assess the viability of the business and how it can support the repayment of the loan availed. This document should include cash flow, balance sheet, profit and loss, and projected financial statements.
Personal / Business Credit Report
Most lenders or banks will obtain a credit report as part of the application process. A credit report from the three major consumer credit rating agencies in Australia is usually required by majority of the banks and lending institutions. In order to self-assess your approval chance, you should get your personal credit report. If your credit report is not that outstanding, you may need additional supporting documents to validate your credit worthiness.
Similarly, if your business has been operational for more than a year, you should be able to obtain a credit report for your business. It is likewise important to check and review your business credit report before proceeding with the application process.
Income Tax Returns
This is the lender’s way of validating that your business is legitimate and complying with taxation requirements. You may be required to submit your personal and business income tax returns for the last three years.
Financial Statements / Accounts Receivables/Payables
If your business loan is intended for an existing business, you may be required to submit our financial statements of the business. You may also be required to submit evidence of your business’ current financial position – through accounts receivables and payables.
Be prepared to submit one year of personal and business bank statements. This will allow the loan officer to assess your income and expenses movement.
This will depend on the type of loan you are availing. Most lenders do require a form of security or guarantee that will ensure repayment of the borrowed money. You need to prepare collateral that will go with your application form.
Legal and Business Documents
These should include:
- Company Constitution or Trust Deed (if applicable)
- Copies of existing third party contracts
- Franchising agreements (if any)
- Contract of commercial lease
- Business licenses and registrations
Some banks or lenders may not require all of these documents. But there’s no harm in preparing them ahead of time, just in case any of the above are requested for submission or presentation to the loan officer.