When you apply for any loan, a bank or lender will take a close look at your credit score. Whether you are operating a seasoned business or looking for startup business loans, your credit history is one of the first things a lender will assess. They can assess the credit history of your business, as well as the business finance and personal credit history of any directors.
Bad credit can also be impacted by existing debts with other lenders in the short or long-term, so it’s important to make sure your company and all its directors list these debts when applying for business finance. A Mortgage House Lending Specialist can take you through all this when you apply, and can also let you know exactly which credit histories they will need to check. Other aspects of the business such as working capital may also need to be assessed.
While traditional banks and lenders can baulk at offering business loans to companies and directors with bad credit, you may be able to use collateral or security to bolster your chances. Alternative lenders may also look at shorter-term loans or higher interest rates, or even your capacity to pay, instead of just focusing on bad credit. If you have bad credit, one strategy may be to look into alternatives to business loans. Personal loans are one alternative that may be available, though your credit rating may also be taken into account here too.
If you are a business that has a lot of assets, using those assets can help you in your application for suitable business loans. Assets such as cars and trucks, property, any equipment that is used in running a business, or even money in the bank can be used as collateral. Property collateral doesn’t always have to be business property. The property assets can be residential, commercial or even rural.
Having collateral available can help you secure funding and a business loan interest rate more suitable to your goals. It may also allow a bank or lender to give you repayment terms that are more suitable to your needs.
Banks and lenders want to know that if they offer you and your company business loans and you can’t repay the loan on time, they have the legal right to seize any property or assets you put up as collateral.
Is it still possible to successfully apply for business loans? Surely most companies that apply for startup business loans don’t have a lot of collateral?
Luckily, banks and lenders usually look at more than just collateral when assessing business finance applications. They also look at a range of other business finance criteria, including any bad credit history of the company or its directors. If your credit file is healthy and your directors also enjoy good credit ratings, then that can go a long way to helping with any loans. Banks and lenders can also monitor your current cash flow to see if there is enough flexibility in your business finance strategy to make repayments. Sector finance calculator options can help give you a clearer picture as well.
If you are looking for startup business loans, banks and lenders will also want to take a look at your business plan. They will assess whether they believe your business will be successful and whether your ideas make good business and financial sense.
Business loans are, as they sound, loans that can help you start or run a business. Like home loans, a business loan interest rate can be either fixed or variable.
Fixed rate loans mean your interest rate will be fixed over an agreed period. Fixed rate business loans can help companies budget, as the repayments will be exactly the same over the agreed life of the loan.
Variable business loans have an interest rate that can increase or decrease over the life of the loan, depending on a range of internal and external factors, such as the cost to the bank or lender of providing the loan to you. If your business has a low-profit level, then variable rate loans may increase your default risk if interest rates increase beyond your ability to pay.
There are two main types of business finance – at-call business loans and upfront loans.
At-call loans can be in the form of overdraft or line of credit loans. A bank or lender can approve a loan of a certain amount and you can continue to borrow up to that amount, and repay it as usual. Interest is charged on what you have borrowed, not what the limit is. These business loans allow you to access funds on a semi-regular basis, which helps with cash flow. It can also help keep your business moving and operating as you want it while you are waiting for customers to pay for the goods or services you offer.
Upfront loans are also known as fully-drawn advances. You can access the entire loan all at once which can help you buy equipment to expand your existing business, or even buy a new business. At-call loans will usually have no fixed terms, whereas upfront loans will require you to make regular repayments of both the loan principal and interest.
Both kinds of business loans can attract fees, and it is important to understand what they are before applying. Higher overdraft limits usually attract higher fees, and there may be clauses in a contract where banks or lenders can demand repayments of the whole overdraft amount at any time. Speak with our Mortgage House Lending Specialists for all the details around any aspect of business loans.
Banks and lenders often have a range of criteria to meet before they allow applications for business loans, as previously discussed:
However, there are also some important business finance variables you may have to meet before you are considered for any loans. The first is your business turnover. Depending on the business, banks and lenders may require you to turn over a certain amount of money before you are eligible for a loan. Talk to Mortgage House about how your turnover can help you secure business finance.
Some banks and lenders can also require you to continually prove your turnover, by keeping them up to date over the life of the loan. How long your business has been operating can also be a factor in eligibility, especially for unsecured business loans. However, banks and lenders may not be as strict on the age of your business for start-up business loans and equipment loans.
One of the key ways to help your business qualify for business loans now and in the future is to develop a detailed business plan. These kinds of plans don’t have to be hard work but can have big impacts. If you are applying for startup business loans, they are a way for a bank or lender to see you have done your research and have identified an opportunity in the market. For existing companies, business plans can show banks or lenders you have a strategy for growth.
For a new business, a business plan can help improve your chances of securing financing and investment. Established businesses should review their business plan and update it regularly in order to provide direction for growth. Your business plan should set out the vision and direction of your business and where you want it to go, as well as the strengths, weaknesses, opportunities and threats that exist. To find out more about how to write your own business plan, click here.
As one of Australia’s most awarded non-bank lenders, Mortgage House offers a wide range of loans, including business finance and business loans. If you’re a business owner, we want to work alongside you to help your business grow.
We understand the importance of trust, and that’s why we want to work with a continued focus on being competitive with our business loan interest rate levels. We work hard to provide loans and services that are tailored to the needs of every business, whether it is looking for suitable startup business loans, seeking information via a business loan calculator or finding suitable working capital.
Running a small or mid-sized business is a big deal and we know that cash is your SME’s oxygen tank. We can help you breathe easier. We understand that the day-to-day of operating a small business isn’t easy and if you need finance for anything, from an expansion opportunity down to purchasing a replacement coffee machine, we can help.
At Mortgage House, we are proud to offer flexible solutions for a variety of business loan needs, such as:
If you are an experienced business owner or want to take the plunge, Mortgage House has loan solutions for every business type. Even if you’re a budding entrepreneur taking the leap into business ownership, we’re with you.
We actively listen to our customers’ needs, not what we think their needs may be. This allows us to always identify suitable business loans for individual companies. We provide ongoing support through the life of the loan and provide our business and home loan customers with all the tools, knowledge and experience we can. We want to help you make getting business loans easy.
At Mortgage House, we’re no strangers to the business owner’s journey. It’s a long (but rewarding) one. But don’t worry, we can help with that. Click here to speak to us!
