If you have a business, chances are you will require access to business credit at some point. Whether it’s for new premises, start-up costs or an unexpected emergency, having credit available to you can make all the difference in meeting urgent demands and taking advantage of opportunities. Applying for business credit can seem like a complex process, but with the right information it needn’t be daunting.
List of Documentation
The first step in the process of applying for business credit is assembling the necessary documents. While the exact list of documents may vary depending on the lender and your circumstances, typically you will need to provide:
1.Proof of identity, such as government-issued picture ID (e.g. driver’s license);
2.Proof income and assets, such as bank statements, financial statements and tax returns;
3.Details of the business, such as registration details and financial statements;
4.Business banking details;
5.Credit history, including any existing loans or lines of credit.
It’s important to read through any requirements thoroughly before submitting your application, to ensure that you have all the required paperwork to give yourself the best chance of approval.
Description of the Applying Process
The application process for obtaining business credit will depend on the provider and the type of loan. Generally speaking, the process involves the following steps:
1. Research: Compare lenders and types of loan to identify the most suitable option;
2. Gather Documents: Assemble the required documents as detailed above;
3. Submit Application: Submit your application, along with any applicable fees, through the lender’s website or by mail;
4. Processing: The lender will then review your application and make a decision;
5. Approval: If approved, you will receive the loan;
6. Repayment: You will then need to begin repaying the loan in accordance with the agreed terms.
Online and Offline Applying
Most lenders now offer online applications, so it’s usually just a matter of filling out a form and uploading the relevant documentation via their website. For larger loans, it’s worth considering making an appointment with a lending officer who can take you through the process in-person. This allows for a more personalised approach and can give you greater access to internal expertise.
Who Can Apply for Business Credit?
In order to apply for business credit, you must typically fit certain criteria. These criteria may include:
1. Proof of business registration, such as an ABN or ACN
2. At least 6 months trading history
3. A minimum turnover and/or credit limit
4. Good Personal and Business credit history
5. Documentation such as financial statements, asset listings, balance sheets, etc.
6. Minimum age of 18 years
7. Australian citizenship, residency or valid visa
It’s important to remember that each lender will have different criteria when it comes to deciding who and what they will lend to.
Why You May Need a Business Credit?
There are many reasons why a business may find themselves in need of access to credit. These can range from practical needs, such as acquiring new premises or equipment, to protecting against cash flow fluctuations or being able to take advantage of sudden opportunities. Having access to credit can also help safeguard against unexpected costs and emergencies that may arise.
Pros and Cons of Taking Business Loan for Company
As with any major financial decision, there are pros and cons associated with taking out a loan for a business.
Some of the advantages include:
1. increase in working capital, allowing for expansion and growth
2. Increased purchasing power
3. Establishment of a good credit history
4.Tax advantages.
The downsides of taking out business credit may include:
1. Possible strain on current cash flow, due to loan repayments
2. Risk of defaulting on payments if the loan can’t be repaid
3. Interest charges, which reduce the overall amount available to the business
4. High fees, such as origination or underwriting fees
5. Endangering personal and business credit ratings
Alternatives
There are a variety of options available for businesses looking for financing. The most common alternatives to taking out a business loan are:
1. Personal loan: Borrowing from private or family sources
2. Line of credit: A pre-agreed sum of money that is available for use when needed
3. Credit cards: Short-term borrowing that can be used for purchases
4. Equity financing: Selling a portion of the business in exchange for funding
5. Crowdfunding: Using online platforms to raise money from a large number of individual investors
6. Angel investors: Seeking large investments from experienced businesspeople
It is important to carefully consider all the financing options available to your business to ensure you are getting the best deal.
Conclusion
For many businesses, applying for business credit is a crucial part of growing and expanding operations. With the right information and research, it need not be an intimidating process. By understanding the advantages and disadvantages, researching competitors and lenders, and gathering the necessary documents, you can make an informed choice about the best option for your business.