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5 Steps to Get a Startup Business Loan in Adelaide

5 Steps to Get a Startup Business Loan in Adelaide

Picture this: you’ve got a brilliant idea for business, but you know that you’ll break the bank if you fund it yourself. If this speaks for you, it’s time to get a business loan!

Why should you get a business loan?

Why should you get a business loan

A business loan isn’t just for someone who’s short of funds to start a business. Some may say that it’s actually a necessity to start a business so that you’ll have a safety net. 

Here are some reasons why you should get one:

  1. To have a safety net – When taking risks, it’s always best to give yourself a way out so that you won’t be left with negatives in case you fail. After all, if there’s anything constant with business, it’s unpredictability. 
  2. To expand your business – If you feel like your current business is already reaching stagnancy, try investing in a new business to enter a new market. You might just have your next business breakthrough with a loan. 
  3. To improve business marketing – One of the best ways to expand your business is to make it known to a wider audience. Try investing in better marketing to make your business expand.

If you’ve made up your mind about getting a business loan, check out the steps you need to take to get one. If you’ll have business sold as part of your new venture, check out the best business brokers in Adelaide.

Step 1: Determine the kind of loan you need (and if you can even get one)

Why should you get a business loan

Before anything else, start with understanding what you need. We suggest knowing which type of business loan you’ll take first. 

Types of Business Loans

  1. Microloan – This is the best type of insurance for small businesses that want to expand their company. The loan amount usually ranges from $10,000 to $50,000. 
  2. Term loans – These loans provide a lump sum that will be paid over some five to ten years. This is a popular choice because you’ll have the option to either have it secured or unsecured (which we’ll explain later). 
  3. Equipment financing – This loan is for purchasing additional equipment that can increase the productivity of the business, such as point-of-sale systems. Make sure that the equipment you’ll buy is actually needed for the growth of your business. 
  4. Invoice financing – These loans cover the unpaid invoices of customers. It’s recommended if you’ll need money upfront, but it usually results in having about 15% of the original amount you’ll be getting. 
  5. Commercial real estate loan – These loans are best availed by big businesses that will need a physical location. With the usual digits reaching millions of dollars, it’s a very big type of loan that’s reserved for high-revenue businesses. 
How to Know If You Can Get a Business Loan
The best way to know if you can get a business loan is to check your individual or business financial records. The lending company will check your trading history, tax records, credit records, and the like. 

Step 2: Compare lenders

Step 2

There are plenty of lenders in Adelaide, each one offering differences in contract inclusions, length of payment, and interest. Before choosing one, we recommend you look for the following: 

  • Many years of business
  • Plenty of positive customer recommendations
  • Many options for loans
  • Clarity of loan terms
  • Data security

Step 3: Check the loan’s terms

Step 3

Once you’ve chosen the company you’ll go with, now it’s time to check the terms of the loan you’ll be availing. The best companies know how to keep it short and simple, so always clarify parts of the contract that seem vague to you. 

In addition look for the following parts of the contract, as they’re the most important:

  • Date of effectivity – It includes the date when the loan will be provided, along with when you’ll start the payment. 
  • Collateral/security – This pertains to the piece of property/company asset which the lender can acquire in case you’re unable to pay for the loan
  • Terms of condition – It states the loan amount, dates for payment, prepayment agreement, and the like
  • Penalties – Be prepared for the worst and always assume that there’ll be times when you’ll be late for payment. Thoroughly read the penalties of the contract so that it won’t deal a heavy blow when it happens.

What’s the difference between variable and fixed-rate loans?

What’s the difference between variable and fixed-rate loans

The main difference between variable and fixed-rate loans is that with the latter, the amount you pay regularly can fluctuate depending on the current economy. 

Check out the table below to be guided about the pros and cons of both. 

Variable loansFixed-rate loan
Pros: More competitive ratesYou can get fewer business loan rates on some monthsProsPayment is the same throughoutYou can properly plan your business’ finances 
Cons:Has higher rates on specific monthsAffected by volatile economyCons:Usually has more expensive upfront ratesYou don’t get the benefit of a lower base interest rate

Step 4: Prepare the required documents

Step 4

Now that you know which company and which loan you’ll be taking, it’s time to prepare the documents. While paperwork may seem daunting at first, it’ll be simple once you become familiar with the exact ones you’ll need.

The usual documents needed for business loans include

  • Financial statements – It’s the summary of all your assets, income, expenses, and the like. Given how dizzying arranging all these documents can be, we highly recommend getting an accountant to do the job. 
  • Proof of income – The person applying for the business loan, may it be a director or shareholder, will be asked for their tax returns. You’ll also have to state all other sources of income aside from the business itself. 
  • Identification – Finally, you’ll be requested a government ID. If you’re applying online, you may use the website provided by the local government.

Step 5: Submit the application

Step 5

Once you’ve talked with an accountant and business partners, you’re now ready to submit those documents. Some companies provide purely-online transactions, while some require you to submit the documents on-site so that they can negotiate with you. 

What should you do when your business loan application is rejected?
In case your business loan application is rejected, communicate with the lending company to know the reason. The common reasons for it include
Unpaid debtsPoor credit scoreIncomplete paperworkUnconvincing business plan
If you’re having trouble planning your finances properly, we suggest hiring a financial advisor to guide you.

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