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5 tips to help you obtain financing

If you're looking to grow as a business, financing can provide the necessary fertiliser.

According to the most recent figures available from the Australian government, there are over 2.3 million businesses throughout the country. While each one of them is unique in its own way from the customers it draws to products and services it sells they all need to spend money to make money. Regardless of how long they've been in operation, this is an ongoing necessity. Whether to increase cash flow, purchase all-important equipment or build on an existing space, funds help to make business improvements possible.

One way of obtaining those funds is through financing. The question is: How? Whether you're just considering applying for a small business loan or know you need the money to take your business to the next stage of success, these tips can help you get the funds that you're looking for.

1. Figure out what loan type makes the most sense
You may know what you plan on doing with the funds for your small business, but you may not know that there are specific types of loans to fit your needs. For example, if you're aiming to purchase state-of-the-art equipment to improve your supply chain, asset financing is designed for this type of investment. If you're an online firm where all transactions with your customers are conducted via the internet, an online business loan may make the most sense. If you're unsure, you may want to seek the assistance of a financial management firm, accountant or adviser who can guide you through the process.

2. Ensure you have the appropriate amount of credit
Lenders use credit to establish whether you're a good candidate for a small business loan. By examining your credit score, they can determine how much money you can afford to borrow and at a particular interest rate. The best way to fully evaluate your creditworthiness is by accessing your Personal Property Securities Register (PPSR), according to the Australian Small Business and Family Enterprise Ombudsman. In tandem with checking your business credit rating, your PPSR will give your lender the specifics it needs to evaluate whether you're a good loan candidate. But first, go over these reports with your accountant or adviser. They can flag any potential issues you may need to address before submitting your application.

3. Keep your books as organised as possible
If there is one thing lenders like more than anything else, it's organisation. Financial institutions must perform their due diligence to ensure that you not only get the loan that's right for you, but have the capability to pay the debt off. This is a crucial step for all parties involved. The easiest way for them to determine that is by reviewing all of your financials. For example, you'll need to show the lender some of your bank statements over the last few months. As the ASBFEO pointed out, these details may include the last six months' worth of transactions so your lender can check to see if there were any overdraws or defaults.

Maintaining a paper trail of receipts, business expenses and any financial commitments you have can make the underwriting process go much more smoothly. Your adviser may suggest you make a list of all your financial commitments if you don't have one already.

4. Make or update a business plan
You probably have a number of goals as a small-business owner, whether those aspirations are for a given month, year or five years from now. Goals are another thing that lenders like to see. If you haven't made a detailed business plan, now is the time. Important aspects to include in a formal business plan are profit and loss statements, balance sheets, your budget and a cash flow forecast, the ASBFEO suggested. The more details you can provide to these business plans will supply your lender with the context it needs to assess your business needs.

5. Know yourself and what you can afford
It's safe to say that no one knows your budget better than you do. While an adviser can help you in this regard, only you can truly appreciate whether you have the means to make regular payments for a small-business loan. For example, if you're struggling with ongoing expenses as it is, adding another cost may cause problems that can set you back. Really try to do some self reflection before applying for a loan. If you aren't sure or are on the fence about financing, speak to an adviser or accountant for guidance. They know what questions you should ask.

From budgeting to cash management to strategic planning and so much more, WMC Accounting can provide you with the ongoing professional services that can help your firm achieve greatness, which may come through financing. Contact us today to learn more about how we can offer solutions.

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