FOUR MISTAKES SURE TO BURY YOUR LOAN APPLICATION
I recently asked one of Australia’s top business finance brokers for the main reasons lenders decline business loans.
Paul Harbott from the Business Finance Centre came up with the following absolutely surefire, guaranteed reasons your application will end up in the bin.
The good news is that with a little bit of planning and time you can fix the problems.
Lenders like to be certain that you will repay the loan in a timely manner.
Any hint that you may not is going to endanger your application.
One of the first thing a credit analyst does is examine the repayment history of all your credit accounts.
You are on a slippery slide to nowhere if the documents show payments are always late.
It’s also a sign of a struggling business.
Unless you love rejection, don’t submit documents showing consistently late payments.
Postpone your application for a few months and bring them up to date if you can.
Before your loan is approved someone will scour your business and personal bank accounts looking for dishonoured payments.
You might get away with one or two, but a bank statement littered with them is a pretty convincing sign that business isn’t going well for you.
That’s not going to be good for your loan application.
In some instances, lenders want to see 12 months worth of business statements and, yes, someone will go through them line by line.
To get that application approved make sure you keep dishonours to a minimum and have a good excuse to explain the ones that are there.
Lots of business owners use the tax office as a defacto bank.
It’s understandable. You need cash to run your business, so instead of making a tax payment you spend the money on stock or to pay staff hoping things will turn around.
Lenders understand this can happen, but if you have a tax debt and have not entered into an arrangement with the ATO to pay this money back you can forget about a loan.
They don’t want to get into an ugly fight with the ATO over who owns what after it has closed you down and wound you up.
In short, make sure your tax affairs are in order before applying for finance.
You don’t have to register for GST if your business earns less than $75,000 a year, but registration suggests you have some ambition and expect to grow.
How can you expect a lender to take you seriously, if you don’t take your self seriously?
As well as that, the quarterly business activity statements you provide to the tax office give the lender a good idea of how much revenue your business generates.
That’s important information in establishing your ability to repay your loans.
No Gst? The chances are there will be no loan.
These four mistakes are all fixable, though it may take a little while and they are not the only things that can result in your loan application being declined. However, they are the most common and most likely to be fatal.