Are you wondering how to acquire business loans in Australia? Choosing the right one can be the game changer of any business. You might encounter challenges with these type of loan, such as the document gathering process is very demanding and strict.
Business Loan Documentation
Generally, to be approved for business loans, you will need to supply your tax returns, Business Activity Statements (BAS), and a signed Borrower Certificate of Income Declaration Form. The following is a list of the documents which are commonly required for a business loan application:
- Tax returns. The last 2 years of your full personal and/or company tax returns may suffice to help prove any income you declare on your application. Keep your tax return records up to date. Do this by reconciling daily sales to make sure all sales are accounted for. You should also keep accurate records when you use business purchases for private purposes or make cash payments and drawings. This is to easily separate your business finances from your personal finances.
- Financial Statements. These may include any profit/loss statements which show how the net income is arrived at over a stated period. These will also support the income that you will declare.
- Proof of rental income. Together with the real estate statements or copies of your executed lease agreements, you can declare any income from rental properties you may have.
- Notice of Assessment. Prepare your latest Notice of Assessment (NOA) from the Australian Taxation Office (ATO). NOA shows tax information such as the amount of income tax you owe(d) on your taxable income. Other details, which are not part of the assessment, are included such as the amount of credit you have for tax already paid during the income year. Lenders may require you to provide the last 2 years of your NOA.
- Bank statements. This includes statements showing your savings and business transactions. Lenders will want 6 months bank statements to confirm a genuine pattern of your savings. It may also include statements showing any other outstanding loans or credit cards you have with other lenders.
- Company information. Since you have a business, be prepared to provide information such as your company’s Australian Business Number (ABN), address, etc. Lenders may verify that your ABN has been registered for more than 2 years, as well as registered for Goods and Services Tax (GST). It must be ensured that your business is profitable, hence the GST requirement.
- Proof of identification. This should be enough to pass the 100 point check. The 100 point check is a personal identification system adopted by the Australian Government to combat financial transaction fraud by individuals and companies.
Depending on the lender, your proof of identification may include your Australian driver’s license, passport, birth certificate, or your proof of age card. You can scan your ID and attach the digital file to your loan application. You can also copy your ID and fax it over to the lender.
Low Documentation Loan
It is probable, as you are looking for business loans, that you may want to consider a low documentation loan. A ‘low doc’ loan gives those who are running a business the chance to obtain financial help.
A low-doc loan offers credit to individuals who otherwise wouldn’t be able to meet the full documentation loan application requirements. Different lenders have different application requirements for business loans.
Most low-doc loans are restricted to a slightly lower than normal loan to value ratio (LVR). The LVR implies the percentage of the loan you are permitted to obtain without having to pay lender’s mortgage insurance.
You may also utilize a low doc loan for personal use, such as purchasing a new home or refinancing an existing mortgage from another lender.
You may be asked to pay upfront fees or any ongoing fees to set up the loan, so make sure to check these with the lender. You should also check if you will be charged for any loan features, such as flexibility and convenience.
If you are wary, the best way to improve your credit score is to demonstrate your creditworthiness. Get a copy of your credit file and check where you stand and whether there’s an area you need to address. You are entitled by law to get one free credit report every 12 months.
Prove your creditworthiness by paying bills on time and clearing up defaults. As long as you meet the eligibility requirements, you can apply for most business loans. Increase your chance of approval by doing your research diligently. Compare and find the right one for you with consideration of your financial history and your spending habits.