Is your business ready to expand? If so, you are at an exciting point in your business growth. Rather than using personal savings to expand you can look into a loan for your business. We have compiled a list of handy ways to help you succeed in your loan for business application.
- Have a business plan: Having a business plan shows the lender that you are prepared and that you have done your research as to how you will be able to successfully repay the loan. A lender needs to be comfortable with lending the money to the borrower.
- Improve your credit score: One way to improve your success in applying for a loan for business is to have a solid credit history. To show you are trustworthy in borrowing money you can improve your credit score by repaying bills on time a bill. Bills and regular repayments including car loans, rent, phone bills, and other utilities are easy ways to start building a history with credit.
- Know your financial limits: Make sure you know for certain that you can repay the funds. If the lender believes that you are asking for too much money and will not be able to repay the debt, they may deny your application which can make it more difficult when reapplying for a loan in the future. If you’re unsure of how much the repayments on a loan for a business may be, run a quick calculation using the Lumicalculator.
- Determine how you will use the finances: If you can show the lender just how you will be using the fund and prove that it can expand your business, a lender will be more likely to provide your loan for a business. Let’s consider a quick example, Bernard is planning to expand his martial arts dojo by opening a second dojo. He has found suitable premises in a warehouse district in town and plans to apply for the lease. Bernard knows that he should include the cost of all equipment needed for the initial fit out in the total loan amount applied for.
The landlord sets the lease price at $700 per week. Bernard calculates a loan amount of $40,000 will cover the initial fit-out, marketing, first 2 months’ rent, and utilities before business cash flow picks up. He will also need to hire an additional assistant instructor to help with classes. He considers applying for a loan over a 24 month period and is offered a 12% rate of interest. When using the Lumi calculator to calculate his commercial loan repayments it works out to be $953.85 per week.
| Principle Loan | $40,000 |
| Weekly Loan repayment amount | $953.85 |
| Rent | $700 |
| Total Per week | $1653.85 |
Because Bernard calculated his business loan payments he is comfortable with the figures and is now set to expand his dojo.
- Choose a loan structure: There is a wide variety of loans for a business that can be structured differently. You may have heard of the most common types, secured, unsecured, line of credit, and short-termbusiness loans. Each may suit a business for a different purpose. Lumihas several business loan products and can even tailor a specific package to meet your business needs.
- Prepare financial documentation: collect your past financial documentation for up to two years if possible. Showing the lender your current cash flow and liabilities is an excellent way to succeed with a loan for business.
Apply during prosperous economic conditions: There is a time and a place for everything and that includes a business loan. If you’re looking to expand then applying for additional funds may be easier during times of strong economic growth. Lumi is flexible and looks at ways to help you gain the funding if you are applying even when things are as profitable as usual.
- Use collateral: when applying for a loan you may choose a secured or unsecured loan. Secured loans can be beneficial to apply for as this is when the borrower will use an asset to secure the loan. This may be a property, expensive piece of machinery, or equipment. Either way, the risk to the lender is reduced, meaning if you are in a downturn period you may still have access to funding.
- Increase your savings: Having a health account balance will show the lender that you are good with money. It can also be helpful if you have some surplus cash to help with those loan repayments if cash flow starts to reduce during the loan period.
- Find the right lender: Finally, you must connect with a lender that is right for you. Lumi prides itself on its customer service and variety of loans for business structures.
Now with all of these in mind, you are ready to start an application with Lumi today. For flexible, fast funding simply call 1300 005 864 to speak with one of the friendly finance experts.
