1. Understand your finances

Even if you don't prepare your own financial statements, it's important to have a basic understanding of your finances.

Preparing a cash flow statement gives you a good snapshot of your money coming in and going out such as:

  • current income
  • net profit
  • expenses
  • future projections.

Find out how to set up a cash flow statement.

Find out how to analyse your business finances.

2. Prepare your business plan

To get an overview of your financial situation and business goals, most lenders will want to see your business plan prior to loaning money to you.

If you don’t already have one, learn how to prepare a business plan.

3. Know your financial limits

Know your limits for finance and your ability to repay any money you borrow. Work out:

  • if you need the money up-front or on a needs basis
  • what maximum repayment you can afford
  • what your loan to value ratio (LVR) is
  • what assets you have to offer if you need collateral
  • who will be willing to guarantee your loan if you need a guarantor
  • how much equity you have
  • what maximum percentage share of your business you are willing to offer to investors.

4. Choose a loan type for your business

Once you assess your needs, you should examine which financial product is the right one for your business. Analyse the different loan options for:

  • costs
  • interest payments
  • any hidden charges or terms.

Each loan type will have different tax and GST implications. It's wise to discuss this with a business adviser or accountant.

It’s best to shop around and find out what products are on offer when seeking finance. Although there can be discounts for existing customers, you may find a cheaper option with more flexible terms elsewhere.

Common financial products and loan types

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5. Get your paperwork ready

Before you meet or speak to a lender, broker or investor, ensure you’re prepared. You’ll need to bring along documentation such as:

  • proof of identification
  • your business plan
  • main financial reports for the last three years (if available)
  • financial forecasts
  • ratio calculations
  • personal financial information.

Compiling your details into a report will look professional and give your lender an overview of your finances.

6. Check who you’re dealing with

Search for registered companies on the professional registers.

Find out what companies you should not deal.

Find out how to get a copy of your credit report on MoneySmart's Your credit report factsheet.

7. Get expert advice

If you aren't confident answering financial questions when you apply for finance, either:

  • practice answering them
  • bring along a business adviser or accountant who can help you.

8. Apply for a business loan

To ensure you’re prepared for your loan interview, follow these tips:

  • Check the finance details carefully – if you find a much cheaper finance option that sounds too good to be true, find out why it's cheaper. Are the fees higher? Does the interest rate change at any point? Is it from a reputable finance provider? What happens if your LVR gets too high?
  • Manage refusal of finance– you may not be successful when you apply for finance. If this happens, seek feedback and make changes to address any issues next time.

Read next

Learn more about your financing options.

Understand the difference between debt finance and equity finance.