We have finance solutions for commercial & business property…
Redlands Mortgages has a network of commercial lenders including the major banks We have a variety of commercial loan solutions to suit you business needs to include;
Purchase of retail, industrial, residential and commercial property
Construction retail, industrial, residential and commercial property
Securities such as child care centers, hotels, motels, caravan parks and petrol stations
LVR where you can borrow up to 80% of the property value
NO DOC commercial loans
Credit impaired solutions for those with a poor credit history
Other options available
Business Loans Finance solutions for property, development and business finance
Business finance largely restricted to the major and smaller banks but alternative solutions may be viable through private lenders
Business lending for specialist businesses, varies from lender to lender
Franchise Lending from most of the major banks. Funding amounts and eligibility differ from lender to lender
Shot term funding available
How lenders see your loan application
How do business loan applications get across the line? Why do applications get rejected? We take you through what goes into a lender’s decision to approve your application.
Is the potential worth the risk? Essentially, your application needs to show the potential of both you and the lender making a profit and that you are both willing to take on the risks involved. The main reason applications are rejected is that the risk is too high, for both the bank and the applicant.
Is it making a responsible decision? The Australian Prudential Regulation Authority (APRA) regulates the banks to ensure it makes responsible lending decisions. This is so lenders are not just giving out loans to all applicants.
An approval means it wants to do business with you. When a bank approves your loan application, it is essentially agreeing to go into business with you.To get your application across the line you need to present a business case to make this viable.
The quick checklist for a successful business loan application
Your business’ financials. Short written detail of what your business does, your business history, industry information and ownership details.
Your personal financial information. This includes your credit history, personal assets, tax returns and personal banking details. The bank may also ask for a credit check of your business partners.
Historical financial information of your business. You will need balance sheets, profit and loss statements and cash flow statements for the past three years of your business. Have your Business Activity Statement (BAS) ready as well. Applications that are supported with strong financials have a greater chance of success.
Forecasted financial information. You will need cash flow forecasts, profit and loss forecasts and balance sheet forecasts. They should reflect what you expect for the duration of the loan and the assumption that your loan is approved. It will work in your favour if you include the best and worst scenarios.
Sensitivity analysis of financial ratios. This is a technique used to determine how independent variables will impact your business. It may be best to go to your accountant for this.
Details of the loan. A detailed description of why the loan is required and you need to be critical in determining the type of loan you need. You should state the amount that you need and the length of time that you plan to pay back the loan.
How you can help get your application across the line
Along with the essentials of your business application, there are a few application ‘sweeteners’ that can help convince a lender your business deserves the loan.
Offer an asset. You can reduce the risk the lender takes on by offering an asset to attach as a guarantee to the loan. This security could by property (either personal or business) building assets, or something similar.
Identify your own risks. Show you understand your business proposal by identifying risks before the lender does. The risks might be a lack of security or business history, competition, seasonal influences, lack of planning or market knowledge or even poor credit history.
Show you will be able to repay the loan. This doesn’t have to be in the short-term, but even having a longer term plan of how you will repay the loan may help your application get across the line.
Getting a guarantor. If you don’t have security or just want to increase your chances of success, a guarantor from within the business or even outside of it may increase your chances of success.
Common mistakes that can get your application rejected
Asking for too much. Banks have many ways to work out exactly how much you need, so if you ask for more than you really need it may be harder to prove that you can repay the loan. However, do not underestimate how much money you need because you don’t want to go back to the banks a second time as application and establishment fees can add up.
Being impatient. Each bank will have a different loan approval process and the first lender you approach may not necessarily close the deal for you. You are entitled to ask your lender how long the process will take, but don’t be surprised if its longer than you first thought. Take the time and caution to do the paperwork properly because they will be used as material to determine whether your loan will be approved or not.
Relying on your cash flow. Banks also looks at net profits and your colleagues rather than just cash flows. The bank may want to meet with some of your directors to understand the business’s circumstances.
Assuming you can use business assets as security. While this can be a solution for some people, it not acceptable by banks for small businesses.
What’s the right loan for your business?
With the wide range of company loans available you need to consider your business requirements in order to select the right one. Here are some questions to ask yourself to find the right loan:
How long do you need the loan for? If you have a loan term in mind then you can consider a standard business loan, if you’re not too sure when you’ll be able to repay it or think you might need an ongoing line of credit, you might want to consider a business credit card, overdraft or something similar.
How much do you need to borrow? Lenders offer varying amounts so you’ll need to find one that can offer you as much as you need. If you think you’ll need to dip into funds as your business grows, a line of credit might be an option to consider.
Do you have bad credit? Bad credit business loans are available but the interest rate and fees tend to be much higher – see what you are eligible for.
How large is your business? You’ll need to consider the stage your business is at as well as its size before you borrow. This will help you determine the ease at which you can repay a loan and also how much you can borrow – more established businesses may be able to access more funds as they are less of a risk to lenders. You may even want to consider loans designed for corporations, such as corporate credit cards, if your business is considerable larger.
Types of business loans you can consider
There are various types of credit which can be used for business purposes.
· Business loan
A business loan is similar to a personal loan, but it is usually for a larger amount of money. These loans are geared towards business use and are usually available in fixed or variable rate options. The minimum loan amount for a business loan is usually in upwards of $20,000, with some loans having a minimum amount as high as $50,000. Lenders will often let you choose repayment cycles and dates that suit your cash flow and some will give you the option of paying back the loan in set installments or setting up interest-only repayments in arrears.
· Business credit card
Business credit cards work in much the same way as a personal credit card, although you have the option to select that the business be liable for the purchases on the card. Personal liability credit cards, where the holder is responsible, are also available. Providers who offer business credit cards usually allow for additional cardholders on the account, which can help facilitate business activities. Business credit cards may also offer other complimentary features such as insurances or banking package discounts.
· Line of credit and overdrafts
A personal or company line of credit works by letting you withdraw up to and including a set amount of funds. Usually, lenders will only charge interest on the portion of the debt you use and you are able to access these funds easily online or in a branch. An overdraft is similar to a line of credit in that you are able to access additional funds, the difference being that overdrafts are usually for much smaller amounts. Overdrafts can be set up with a regular transaction account or cheque account and they allow you to overdraw on the amount you have available in your account to pay for unexpected expenses or to manage cash flow
· Business expansion finance
If you’re looking to expand your business but don’t have the funds you need, there are business expansion loans available. These loans can help you expand your operations or your staff, invest in your product or to open another location. Some lenders also offer loans to bad credit applicants.
· Tax debt loans
Tax time is an expensive time of year for any business – small or large. If last year’s tax return is hurting your cash flow and you’re looking for some financing to help see you through, there are tax debt loans available. These loans are available for large amounts and can help ease the pressure of tax time for your business.
· Business vehicle finance
Company cars and business vehicles are often required, and so is financing in order to purchase them. There are a few options for car financing but these loans are almost always secured to the car that is purchased. Common options include a finance lease, commercial hire purchase, chattel mortgage or novated lease. Standard secured business loans are also available.
· Business equipment finance
Businesses often need to purchase equipment that is necessary for its day-to-day operations. This equipment can be expensive, as can be its maintenance. This is where business equipment finance comes in. You can use this loan to buy or even rent equipment needed for your business, whether it be a forklift or even medical equipment.
· Business insurance
Opening a business comes with a lot of unexpected expenses, and one of them is insurance cover. As a company owner you may want or even be required to get public and products liability insurance, personal accident and illness, or insurance to cover your business property. To cover expensive premiums you can take out insurance funding which can cover the upfront costs. The loan amount can only be used to finance insurance cover and you will usually have to pay back the loan in a short amount of time, around 12 months to two years.
Is there anything to avoid?
Do not apply for a business loan until you can present a good case to the lender to prove your suitability as a borrower. You will need to have a detailed business plan and be able to demonstrate knowledge of your business’ past and future financial requirements. You should also be confident and be able to show some sort of ability to be able to pay the loan back.
“My business loan application wasn’t approved. Now what?”
Speak to Redlands Mortgages as there are a range of reasons why a business loan application can be denied, it is important to ask for feedback from your lender if you do get rejected. This feedback will give you an insight into what you did wrong, which you can improve on for the next time you apply.
Call us today on 1800 REDLOANS
Redlands Mortgages Pty Ltd - Where Mortgages Are Just The Beginning