How to make sure you get the right business loan

How to make sure you get the right business loan

Story in partnership with Savvy.

It's often said that small businesses are the backbone of the Australian economy - the more than 2.4 million enterprises out there that employ almost half our workforce.

For many of those businesses, the last two years have delivered significant challenges as they navigated and side-stepped their way through the rounds of shutdowns, re-openings and shifting customer demands.

Depending on the business sector and state they were operating in, businesses have either been ramping up, pivoting, or hunkering down, or perhaps all three, at various stages.

But today, as the country steadily opens up, and continuing government support to ensure they thrive, there are signs small business owners are looking to the future with optimism and plans to revitalise and grow their enterprises.

With recent increased demand for business credit, indications are that economic confidence is on the up.

"After these challenging years it's looking like business owners are ready to invest in their operations," said business finance expert and CEO of Savvy, Bill Tsouvalas.

"They are thinking now's the time to get moving again and they're looking at sourcing some finance to revitalise their business and embrace opportunities as the country opens up."

These days there are many more financing options available for small businesses as the numbers of alternative lenders continues to rise.

How to find the right business loan

Whether a business needs money to expand its premises, buy new equipment or machinery, or help cover staff salaries as it ramps up, there's a wide range of small business loan options available.

From traditional bank loans, to unsecured business loans, to lines of credit, it's important to take the time to decide which is best for your purpose.

"Today there are more lending options available and it can be very simple and fast to get a loan, but it's important to make sure it's the right financing for your business and your situation," said Mr Tsouvalas.

"The growth of alternative lenders that have proliferated over the past seven to eight years, plus low interest rates, means there's probably never been an easier time for business to access the finance they need to be able to grow."

One of the first steps to navigating this vast world of online lenders is to tap into the services of an experienced broker like Savvy to find and compare different loan products and get advice on which is best for you.

What you'll need before applying

Being well prepared ahead of applying for a loan is essential. You'll need to demonstrate a sound business structure and have a good credit rating, and provide a clear explanation about how the finance will be used.

"For an unsecured loan for example, these alternative financiers generally request three to six months worth of trading history - business bank statements - to determine whether or not an applicant qualifies, compared to around two years of audited tax returns that are required by traditional banks," said Mr Tsouvalas.

"So the growth of these sorts of lenders have definitely reduced the barriers for accessing finance for small businesses. But you certainly need to do that important work to assess your business and provide strong documentation."

Pitfalls to avoid

No matter how well a business is performing there will always be times in its life that an injection of finance is needed to help take it to the next level. It's a common challenge, especially for small to medium enterprises, and those that are just starting to get established.

However, taking out a business loan needs to be done for the right reasons, said Mr Tsouvalas, and with a smart plan in place for repayment.

"Especially if you're considering something like an unsecured loan, which will have higher interest rates, make sure you take a realistic approach and be sure you have the capacity to make the repayments, " he said.

"You don't want to be dependent on credit just to pay your bills and run your business. But the importance of businesses being able to access finance at times when they need a cash injection makes a business loan a valuable option as part of a growth strategy."

To take advantage of Savvy's services and find the right loan to fuel your business growth visit savvy.com.au

Story in partnership with Savvy.