How to prepare a small business for getting funding

With the impact on trading, cash flow and general hell we have all experienced over the past few months, looking for financial support over the next few months wouldn’t be unusual.  Here is a simple guide to read through to help you prepare to get loan for your small business.

  • Get your book keeping in order. 
    1. if you use a program such as MYOB or Xero, get it up to date .  Ensure it is reconciled and accurate.  Make sure you haven’t included personal expenses in there!
    2. Ensure that you have lodged everything that is due.
    3. Check with the ATO to ensure that not only that you have lodged everything but also have PAID everything to them as well.  It’s pretty common to be asked to provide evidence of debts owing to the ATO as part of your loan application.
  • Get copies of your bank statements for the business for the past 12 months.  The bank may ask for them.
  • Get copies of your past 2 years of BAS statements (if you have them) and Tax Returns lodged. 
  • Make a list of everything that you owe.  How much money do you need to bring in on a regular basis to ensure they are all paid?  Include things like credit cards, subscriptions (to programs like MYOB, memberships and so on)
  • Do you have any old outstanding bills?  Eg: something that has been lodged with a debt collector?  You will need to get all of those cleaned up/sorted out before applying for a loan.
  • Keep in mind that every loan application is recorded – and the more applications you make the more it will reduce your credit chances – particularly if you get a number of knock-backs.
  • WHY are you getting the funding?  If you are buying an asset like a car or piece of machinery, consider how it will increase the businesses ability to make money.  Now is not the time for window dressing.
  • Examine the terms of the funding offered closely.  High interest rates is not the only way you can find yourself paying too much.  Check out the fees charged, the way you must pay the loan – is it in lump sums, can you prepay in advance without penalty, how long will the loan last for and can you really afford the regular payments…
  • Are you guaranteeing the loan?  Are you being asked to put your home up for security?  Be sure you understand what this means if you find yourself unable to pay the loan.
  • Final check – what happens if you don’t get the loan?  Can you still operate or not.  Can you operate your business differently so it will not require as much funding or no funding at all?