Business finance solutions are essential for small and medium enterprises (SMEs) aiming to manage cash flow effectively.
To secure a cash flow loan or other type of financing, it’s important to prepare an application that is well-prepared, tailored, and compelling.
This article will guide you through the key documentation, preparation steps, and practical tips to help you submit a successful application and access the working capital your business needs to grow.
To find out more about how business finance solutions can help you fuel growth and pay off debt, read our article here.
Note: Every finance provider and lender is different and requires unique eligibility criteria and documentation. The information in this article is general and it should not be taken as specific advice. We recommend you speak directly to your lending specialist in regard to your individual application.
Preparing the Documentation for Your Loan Application
To put your best foot forward, it is essential you gather documentation demonstrating your business’s financial health, plan and operational viability. Below is a general list of common documentation you may need to provide.
1. Business Plan
Your business plan should detail your objectives, your financial projections and strategy, strengths, weaknesses, opportunities and threats facing the business, marketing strategies and organisational structure.
2. Financial Statements
There are several financial statements you may need to provide. It’s good practice to have your profit and loss statements, balance sheets, and cash flow statements for the past two to three years – or for as long as you’ve been trading if you’re a newer business.
3. Bank Statements
Depending on the type of cash flow loan, personal or business bank statements may be required to demonstrate your cash flow and financial history.
4. Tax Returns
Tax returns, again personal or business, can also be used to demonstrate the financial health and history of a company. We recommend having two or three years’ worth of tax returns available.
5. Registration Documents
These can include your Australian Business Number (ABN) or Australian Company Number (ACN), along with any relevant licences.
6. Legal Documents
If you have partnership agreements or shareholder contracts, you may also be required to provide them as part of your application.
7. Collateral Documentation
Not all business finance solutions require collateral – such as Invoice Finance and unsecured Business Loans. However, if collateral is needed, ensure you have relevant property titles or vehicle registration documents.
Preparing Your Cash Flow Loan Application
Once you have your documentation, you are ready to begin preparation for the application.
To ensure the best chance of success, follow these steps:
- Order your documentation – Ensure all your documentation is organised and ready to streamline the review process and fast-track your application.
- Update your business plan – Review your business plan to ensure the financial projections, market analysis, and organisational structure are accurate and up to date.
- Review your financial health – Analyse your financial statements to confirm they are complete and accurate, and ensure you fully understand your current financial position.
- Identify the loan purpose – Clearly articulate why you need the loan, how much you’re applying for, and how it will directly benefit your business.
- Prepare answers – Anticipate potential questions from lenders and prepare thoughtful answers to increase the likelihood of a successful application.
Applying for Invoice Finance
Invoice Finance is a type of working capital solution that allows businesses to borrow a cash advance against the outstanding invoices owed to them by their customers.
Preparing for Invoice Finance Application
For an Invoice Finance application, your account receivable serve as collateral. While there’s no need to provide documentation for physical assets, you will need to submit the invoices you wish to leverage for access to working capital.
Make sure you have all the documentation you need regarding your customers and their outstanding accounts as lenders will likely conduct credit checks on your customers. This means that past invoices, receipts and bank transactions may be required.
Applying for Trade Finance
Trade Finance helps businesses manage cash flow for importing or exporting goods, as well as domestic business transactions.
When applying for Trade Finance, you may need to provide additional documentation beyond your business plans and financial statements.
This may include invoices and purchase orders related to the intended or past trade, which help verify the legitimacy of the transactions and expected cash flow. Additionally, contracts for sales or agreements with suppliers and buyers can further substantiate the terms of trade.
In some instances, you may need to provide a ledger detailing account receivable and payable, especially for established businesses, to help lenders assess trade history and your cash flow situation.
Applying for Business Loans
Business Loans are the most well-known and simplest of financial solutions in this list. This lump sum of loaned working capital can be used for any business-related purposes, such as covering operational expenses, financing new equipment purchases, expanding services, or covering payroll.
There are two forms of Business Loans: secured and unsecured. With a secured Business Loan, you will need to provide an asset, most commonly property, as collateral. Secured Business Loans typically offer better loan terms and lower interest rates as they require collateral. For more insights into secured lending, read our blog on Secured Business Lending.
Unsecured Business Loans, whilst typically smaller in value and shorter in loan term, do not require collateral. Therefore, if you are putting through a Business Loan application for an unsecured facility, you will not need to provide asset-related documentation.
Tips for Ensuring a Successful Loan Application
Be Honest
It goes without saying, but providing accurate information about your business’s financial situation and objectives is essential.
Understand Your Situation
Make sure to review your credit report in advance to address any discrepancies. Similarly, take a close look at your financial documents and projections so you can present them clearly to lenders.
Seek Professional Advice
If applying for a cash flow loan isn’t your area of expertise, leverage the experience and knowledge of those who specialise in it. Reach out to the ScotPac team to arrange a one-on-one consultation with a specialist lender today.
ScotPac – Speak to Us About Your Cash Flow Loan Application
The ScotPac team has been delivering business finance and cash flow solutions to businesses in Australia and New Zealand for over 35 years.
Today, we provide $23.9 billion in funding annually, supporting over 8,500 customers. You can trust that our lending specialists have the expertise to help you prepare a winning cash flow loan application.
If you have questions about your application, want to explore custom cash flow solutions for your business, or simply wish to learn about our range of business finance solutions, contact the ScotPac team today.