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Applying for a business loan

Choose the best loan and increase your chances of getting it approved

Preparing to get a business loan

When applying for a business loan, it's essential to prepare a detailed business plan and fully inform the lender about your proposed venture.

Providing this type of information will help the lender advise the right finance for you.

Making decisions

Deciding that your business needs a loan is only the first step – there are a number of other factors to consider before you approach a lender:

How much do you need to borrow?What type of loan will you need?How long will you need it for?Can the business afford to repay the loan, interest and any one-off or ongoing fees that come with the loan?What security can you offer the lender, and how will this affect the interest rate offered?

How often will you need to access funds you borrow?

At call loans

'At call' loans – such as an overdraft or line of credit – are available if you need to access the funds on a semi-regular basis to help with cash flow keep the business operating while waiting for your customers to pay for goods.

Upfront loans

Upfront loans – also know as a 'fully drawn advance' – provides the entire loan amount all at once, and are available if you need funds to buy a new business buy equipment to expand your existing business.

What loan terms are right for your business?

Loans that are 'at call' have no fixed terms.Loans provided 'upfront' will need a portion of the loan plus interest paid back – at regular intervals.

The repayment amount will depend on the term or length of the loan. To determine the loan term suitable for your business, you'll need to calculate how much you can afford to service the loan.

Here's a tip: the longer the loan term – the more total interest you'll pay.

What's the level of ongoing funding you'll need?

This is the average amount of an overdraft – or line of credit – that's used at any one time.

For example, you may want to have an overdraft limit of $20,000 to provide money for the occasional big expense – but usually you won't use more than $5000 of that credit limit on average. So in this instance, $5000 is the level of ongoing funding you'll need.

When applying for an overdraft limit, be mindful that the higher the overdraft amount – the higher the fees there could be clauses in the contract where the lender can demand repayment of the whole loan – at any time.

Is a fixed or variable interest rate better?

The choice of rate will affect the stability of repayments overall cost of the loan and the loan features available.

Ultimately, the choice of variable or fixed rates will depend upon how much free cash flow your business generates after you've paid all your expenses – including loan repayments:

With a fixed rate loan – the lender bears the risk of interest rate moves. With a variable rate – you'll bear the risk of interest rate moves.

Here's a tip: if your business has a low profit level, a variable rate loan repayment may rise beyond your ability to pay.

Loan security

Loans can be secured or unsecured by various types of assets, including:

residential, commercial, rural property or business.

Alternatively, some loans are unsecured by any asset. In most cases, the less you provide for security, the higher the interest rate will be.


There can be fees which can make a loan less attractive than it first seems. These include:

one-off fees– such as establishment or application fees exit or discharge fees early termination fees regular fees – such as service fees or line/credit advance fees.

Seek advice

Although the information we've provided presents you with a range of possible finance options – it's important to seek advice from your Finance broker before approaching a lender for a loan.

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