When you apply for business lending, the lender will use a variety of considerations to decide if you qualify for the business lending application or not. In general, there are six important characteristics lenders consider when evaluating your businesses’ eligibility for a business loan.
These same factors will be used to determine your loan’s terms and costs if you are approved. First Choice Mortgage Brokers can assist with your application progress to give you the best chance to be qualified for a business loan.
Personal Credit: Lenders will nearly always be concerned in your company credit, but also to your personal credit as the two are inextricably tied. It is fair to say they’ll want to look at your personal financial wellbeing as well, including your current credit card balance, credit history, billing history, and amounts owed.
Proof of Individual Income: Since your personal and business accounts are intertwined, your personal income will foster the lender’s attention. If your financial situation is in good shape, expect lenders to see you as a lower risk and be more willing to partner with you.
Certification: Your business must have a valid ABN to receive a business loan.
Business Debt Coverage: Having debt in your company isn’t an issue. The dilemma is whether or not your company will be able to meet its debt obligations. An investor evaluates your cash balance and interest payments to get a sense of your corporate debt coverage.
Business Details: Your loan is more likely to qualify if the business has existed for more than 12 months, has a healthy level of revenue, and operates within a lower-risk industry where financial less is less possible. Lenders are more cautious when the business is within high-risk sectors like property, mines, and manufacturing.
Guarantor Contribution: Even if you can prove your company’s profitability, certain lenders may require a loan guarantor. A guarantor is an external party who, if you can’t afford your repayments, will reimburse the loan you have borrowed. No matter if a guarantor is a requirement or not, having one will give your application a better chance of being approved, as essentially, a guarantor ensures a loan will be repaid.