Are You Ready to Apply for a Small Business Loan?

Feeling overwhelmed with everything you need to do to apply for a small business loan? There are a number of aspects you should think over before you apply for a loan. From upgrading your technology to moving to new premises, Mortgage Masters understands how much impact a small business loan could have in helping your business to grow.

Know Your Financial Position

It’s important to have an accurate understanding of your current financial position, as well as an estimation of your future projections, before you apply for a small business loan. For example, make sure you know the ins and outs of your cash flow forecast, and that there are no mistakes or missing details. You need to be confident that you’re able to make regular repayments, so that you can impart that same confidence on to your potential lenders.

Check Your Credit History

Check your credit history before you apply for a small business loan or insurance. Again, go over this with a fine-toothed comb to make sure that there are no mistakes that could trip you up during the loan application. In the worst-case scenario, if your credit history shows accounts, enquiries or defaults you aren’t aware of, your loan application may be declined.

Your credit history is a record of your ability to repay debts and keep on top of other forms of recurring payments. It may include your payment history across home bills, credit cards, mortgages, and financing for other assets such as cars.

It’s free to check your credit history and get a copy of your credit record, assuming that you don’t need an expedited service. You’ll have to use one of the three credit reporting companies in New Zealand: Centrix, illion or Equifax. In the event that your credit history is wrong, each company will have their own process for how to go about correcting this.

Use the Loan to Invest

Will the loan be used to invest? A loan can only be considered “good debt” for your business if it is used to invest, meaning that it will pay for something that will return greater than the initial loan. It’s an easy trap to get out a loan to purchase something that seems essential, but make sure to do the cold, hard analysis in an objective light. Only apply for a small business loan to invest in tangible benefits for your business.

Accurately Calculate the Loan Amount

Accurately calculate the amount you’ll need for your small business loan. This is a balancing act between adding up all the hidden costs associated with how you’ll use your loan, and not overshooting with a larger loan that leads to higher interest repayments. For example, if you’re getting a small business loan to pay for new vehicles, make sure to factor in the cost of vehicle insurance.

Talk to a Loan Broker

For more advice like this, visit our Commercial Loans page. To book a consultation or ask any questions you may have about your finances, give us a call on 0800 630 7171.

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