5 Most Important Things in a Successful Business Loan Application

5 Most Important Things in a Successful Business Loan Application

 Success depends on planning the things in advance and working smart towards achieving it. New Zealand is country full of opportunities and offers everyone equal opportunities to succeed. 99 pct of businesses in NZ are classified as SME (Small and Medium Enterprises) and we hope that this article would help some of the business to plan their business application. In our experience here are the key things which could determine whether your business loan application is successful

  • Generation of Cash Flow to service the debt: Every lender would assess your loan application on this single most important criterion. A business owner needs to show that business is generating enough cash flows to service the debt and can sustain in normal circumstances. An increase in revenue on a quarterly/annual basis gives a lot of confidence to lenders. In case if your business has suffered decline in revenue, you would need to convince the lenders that by using the loan, the business would be able to generate cash flow to cover the debt servicing.


  • Business Plan: A detailed business plan which showcases your knowledge of the industry in which you are operating and how you tried to mitigate the risk factors can help a long way to get your loan application approved. For e.g., if you own a restaurant and looking to expand in another region, a detailed analysis of new market, (including customer profile, age, target segment whether tourists or local) and how you plan to handle any adverse circumstances and mitigate the risk would give you a good chance of loan approval.


  • Credit Rating: In our experience, some SMEs are not aware of their credit ratings. Sometimes even a small delay in payment of utility bill or any other mistake can be recorded in your credit file and give lenders a negative point to decline your application. There are 3 credit rating providers in Australia and New Zealand namely Equifax, Ilion and Centrix. Business owner can ask these providers about their credit rating and check their files. Any information which is misrepresented can be corrected by making a request to these credit providers.


  • Collateral: A good quality of collateral for the loan can reduce not only increases the chances of loan approval, but it can also significantly lower the interest rate for borrowing. Most lenders would consider property as a good collateral. Any other asset such as Motor Vehicle, inventory, unpaid invoices etc can be used as collateral as well.


  • Character: Business owners/Directors shall also look at their personal credit rating from the credit rating agencies and if there is any discrepancy or misrepresentation, they shall rectify that before applying for a business loan. Lenders usually would look at credit history of directors/business owners as well to assess the loan applications. Personal credit ratings are free for individuals to check, and they can get access it normally within 15-20 workings day. Some of the lenders also check criminal records or ask you to certify that there is no criminal case pending.