As we have built such a great reputation as mortgage brokers, people often forget that we also offer business finance at Smartline Rockingham. This is because we have been providing business finance in the Rockingham area since 1999, we have a very good understanding of what lenders want to see when extending credit to a business. Here are some of the factors that determine the fate of your business finance.
Your Business Plan
You must have a professionally prepared business plan. It must include a profit and loss budget and a forecast of future revenue. Even if you have been in business for years, a lender will want to see how well you executed your original plan and how successful you have been.
Lenders also want to see how you plan to sustain and grow your business. What they see in your business plan will have a large bearing on whether or not they decide to loan you money and in determining terms and interest rate.
How Lenders Assess Risk
Lenders create what they call a “business risk profile” when looking at your application. The more you know about how they assess risk, the better you can present yourself. They basically want to assess three main factors.
Security/collateral: They want to know what assets you have to secure the loan. If you are unable to make repayments, they don’t want to be left on the hook for all of the money they loaned you.
Regular Repayments: They will want to see evidence that you are capable of making your regular loan repayments. This factor is known as “cash flow risk.”
Business Risk: Ultimately, they want to know that you will be able to make all of your repayments. They want to know that they will get all of their money back.
These factors are why lenders want to know projected income, expenses and profit. They also know that someone who can provide this is an effective manager.
What Lenders Perceive as Risk
Lenders perceive certain factors to represent higher risk than others. A startup business with no business history or track record of success is seen as a high risk. So is a lack of security, meaning insufficient assets to use as collateral.
They will also want to know what sector of industry your business will inhabit. Then, they look at factors such as barriers to entry, levels of competition, the current economy and how it all relates to the chance of your business turning a consistent profit.
A seasonal business is seen as carrying very high risk. If your business is seasonal, such as souvenirs or farming, you will need to demonstrate that you can make enough during your revenue months to last the entire year.
Other factors that represent risk: bad credit history, lack of management skills, insufficient market knowledge and shoddy planning.
If you are currently under an arrangement with the Tax Office to make payments, this can seriously affect your chance to obtain a loan.
How Smartline Rockingham Can Help
Currently, we have access to 28 of the leading lenders in Australia. We have worked with all of them enough to know which ones favour which kinds of financial situations. Any “business finance broker” can use the “shotgun approach” and send your applications to a plethora of different lenders. Unfortunately, this can have a negative effect on your credit profile if you are turned down by multiple lenders.
At Smartline Rockingham, we will tell you exactly what you need to do to make your application favourable to lenders. Then, we will choose the lender or lenders who are the most likely to provide you with financing and send your application in to them. We will help you gather all of the information they are going to require and help you present it in a professional manner.
From the initial consult to the signing on the dotted line, we will be there with you every step of the way, guiding you and helping you get the financing you need at terms you can work with.
To learn more or for an initial consult, call us today: (08) 9527 1800.
