5 tips to get approved for a business loan
Running a small business is and has always been a rollercoaster ride. But with the arrival of 2020 came a whole new set of challenges. Any business charting a path towards exponential growth now often needs to consider factoring in debt as a potential tool for strategically boosting cash flow. Particularly in the context of COVID-19 and shifting consumer behaviours.
At Lumi this translates to scoping out the best possible loan product for the business in question. And once the research is done, efficiently preparing an application that opens the door for you to get approved for a business loan.
The key? 5 simple steps to completing the process with all bases covered. And a smart presentation of both the business and the owner when submitting online through the Lumi low-doc application process.
Here are 5 tips to help you prepare and improve your chances of getting approved for a business loan:
1. Do The Prep
Well before you begin the application process, it’s very important to conduct a review of your business through the lens of a potential lender. For a company looking to get approved for a business loan this means an initial period of intelligent housekeeping in order to polish up your credit profile.
The checklist for this stage of the process should include the following:
- Settling any minor debts without compromising your ability to meet existing obligations
- Closing off low credit card balances
- Reducing any overdrafts to as close to a zero balance as possible
- Paying back any outstanding loans
- Making calculated decisions about applying for alternative finance solutions
- Weighing up the pros and cons of a short term business loan, business credit card or business line of credit
Any successful business loan application should essentially be managed like a proper strategic operation. These first steps guarantee a real, tactical advantage as you begin the process.
2. Do Your Research
As you’re getting your house in order, perhaps while scoping out the credit boosting short term finance solutions touched on above, we also suggest that you begin searching for the lender where you’re most likely to get approved for a business loan.
This research should include putting the following criteria under a microscope:
- The loan amount
- The loan term
- The interest rate, fees & charges
- The level of flexibility offered by the lender
- The overall reputation of the lender, particularly within your community or industry
The better the fit when you eventually get approved for a business loan, the better your chances of fulfilling the financial obligations you’ve committed to. Even more importantly, taking the time to research, rather than making a snap decision, might just end up being a cost saving exercise. Or one that empowers you to streamline the process and make tangible profit in the long run.
3. Do The Math
Once you have the figures you’re one step closer to having everything you need to apply for a business loan. Next, it’s time to run the numbers. With all the data you require now at your disposal to inform this phase of the decision making process. It’s finally time to compare what’s on offer with what you can ultimately afford.
The Lumi Business Loan Calculator is a must see before you apply for a business loan online. It also just had a major revamp, which now allows potential borrowers, like yourself, to calculate total loan amounts, as well as repayments, depending on what criteria you put in.
It’s as simple as entering in the amount you wish to borrow, and selecting the length of you preferred repayment period. Taking into account the chosen interest rate the calculator will then return a figure for estimated loan repayments.
Interestingly, it also works just as well if the amount of the repayments is what’s driving your decision. This also has a bearing on the total loan amount you wish to apply for. In this case just enter the maximum weekly repayment amount you can feasibly afford. Then select the length of the loan and interest rate. The calculator will subsequently provide the total loan amount you should apply for. This is based on your given information and even breaks down the amount of interest you would need to pay over the course of the loan.
The numbers are estimates. But they’re a great way to get perspective on what your finances will look like once you get approved for a business loan.
An intelligent tool that’s genuinely helpful when it comes to working out how much you can actually afford to borrow. Which in turn supports a realistic application and a better chance overall that you will ultimately get approved for a business loan.
4. Prepare The Paperwork
An integral part of submitting a successful loan application is, of course, ticking every box when it comes to the paperwork that accompanies it. The requirements for submitting a completed application vary between lenders. At Lumi the process is easy and fuss free, with the whole process ultimately designed to save both time and money for business owners.
When you’re ready to take the next step, you’ll need the following to start with:
- A valid ABN or ACN
- Proof of min. 6 month in business and min. $5K monthly turnover
- Financial statements. Our system will automatically and securely connect with your bank account.
Note that lenders might require further documents depending on the amount you wish to borrow as well as your assessed risk profile.
5. Submit Online
At Lumi, the home strait of this process is as simple as the touch of a button. Thanks to the ability to apply online, you can now expect to receive a response within a few hours – and funding on the same business day is also possible.
It’s a fast and smooth finish to an application process. And it can be made so much simpler when following the steps above.
So, now that you’ve done the research and noted the necessary information for your situation, it’s time to get approved for a business loan. And time to lead your business through to the next phase of its journey.
Your Lumi team
The information in this article can provide small business owners with guidance and tips on how to prepare for a business loan application. With the aim to increase the chances of getting approved for a business loan. None of the above information however guarantees a loan approval from Lumi or other lenders. The assessment and outcome of a business loan application remains at the full discretion of Lumi.