Applying for business finance

Applying for business finance

Key points in this article

  • Realistically assess your situation
  • Go to advisers to decide the right amount
  • Prepare a detailed business plan to show your understanding

Applying for finance can seem daunting, but it’s easier once you know exactly what you want and how to approach lenders. This guide can help you assess your needs and assist in preparing a financial application.

Assess your situation

Can your business service a loan or credit line?

Lenders will assess the cash-generating ability of your business. Every business has a limit to the amount of money it can borrow without overstraining its capacity to repay the loan and still pay bills and business overheads.

If your business is close to this limit, you may need to explore other options such as equity investors.

Taking a neutral point of view to determine whether you’ll be able to service a potential loan is crucial

Will the return outweigh the cost?

Have you thought about how you will employ any extra funds? A productive loan will help the business grow quickly and increase profits. This is a wise use of financial leverage. Borrowing money to cover up inefficiencies or declining revenues is not.

How do you start?

Talk to your ANZ Small Business Specialist early on. You’ll learn if your proposal is acceptable, or what you need to change to make your plan a more bankable proposition.

Your Small Business Specialist will provide the forms and planning guidelines to prepare your formal request for finance and suggest professionals and advisers who can help you with some of the details.

Start by considering:

  • how much you realistically need to borrow
  • how much you’ll be contributing yourself
  • security available on the loan
  • business profit available to service the loan
  • any existing debt and any other income sources.

Get as much worthwhile advice as you can find

Borrowing the right amount

Borrowing the right amount is important. Get help from your accountant and advisers to arrive at an appropriate figure. If you borrow too much, you’ll end up paying more than necessary in interest costs.

The rule of thumb is to borrow as little as possible, but enough that you don’t need to apply for further funds for some time. Going back to the bank too soon can show you haven’t really thought through your plans.

Covering your costs

If you’re starting up, ensure the amount you want will cover your set-up costs and leave sufficient working capital to run the business until it breaks even. An accountant can provide valuable advice on the costs you can expect and what to include in your business projections.

Strengthening your case

Prepare a business plan (or update your existing plan) that supports your funding needs. The SWOT analysis section (strengths, weaknesses, opportunities and threats) should be thorough enough to show you understand clearly why you need the finance.

  • Provide a statement of your financial position – an overview of your assets and liabilities, your income and drawings, and any existing debt.
  • Show you’ve had independent, professional advice to understand the legal and financial implications of your loan.
  • Show how much money you have invested in the business and complete a Personal Statement of Financial Position, detailing your income and living expenses.
  • Show what security you can offer to back the loan, such as real estate or other acceptable business assets.
  • Explain your business capability and the strength of your team.

A business plan is essential – without one, the banks will view you like a ship at sea without a map

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