Financing your business
The type of finance you need for your business depends on when you want to access it.
The Australian Government’s Business website provides detailed information on good financial management practices for people starting a business, including:
- setting up bank accounts
- bookkeeping systems
- finance options.
There are different business finance products to suit your needs. Consider the different costs, interest payments and terms and conditions of each option to ensure you get the best product for your needs. Speak to an accountant or businesses adviser for assistance and to understand the tax and GST implications that may affect your choice.
Preparing to get a business loan
If you decide to borrow from an external lender, such as a bank, building society or credit union, you will need to prepare a loan application.
A well-prepared business loan application:
- shows where your business stands financially
- draws a quicker response from a lender
- is likely to result in a loan package tailored to the needs of your business
- helps to obtain the most competitive interest rate and fee structure available.
You’ll need to provide a short description of the business, including:
- past achievements
- products and services
- competition and market position
- business structure.
You’ll also need to provide broader information, including:
- brief details of your experience and background, including trade and business references
- the outlook for your business and the industry in which it operates
- the amount and purpose of the loan
- your equity in the business
- statement of your personal financial position
- balance sheet and profit-and-loss statement for the past three years
- analysis of major influences affecting operating performance over the past three years
- cash-flow forecast for at least the next 12 months, with a separate listing of the assumptions on which it is based
- a listing of debtors and creditors dissected by age and amount outstanding
- repayment term desired
- security for borrowing
- names and contact details of key advisers to the business.
The financial institution uses this information to determine whether you are a ‘good risk’.
Loans can be secured by various types of assets, including residential, commercial or rural property, or other business assets. Some loans may be unsecured. Generally, the less you provide for security the higher the interest rate will be. Be aware that the lender has the legal right to seize any property or asset you offer as security if you can't repay a loan on time.
The interest rate and actual amount you will end up paying back will largely depend on how good a risk you are.
- Getting advice – Department of State Development