Applying for a business loan

Getting a loan could help you grow your business, but it can also be tough. When it comes to handling your business banking and the day-to-day running of your company, here are some tips to help you prepare and choose the right loan. Whether you’re a small business owner or a medium to large corporation looking to expand, a startup or a well-established company, get the know-how to help make your next application a success.

What we’ll cover

• Why should you think about getting a business loan?
• What loan type could help boost your cash flow?
• What should you consider before getting a business loan?
• Who can apply for a business loan?
• What documents will you need for a business loan application?
• What factors could affect my application for business finance?
• How do you apply for a business loan?

1. Why should you think about getting a business loan?

Business loans may provide you with the financial resources needed to achieve your business objectives. They can vary in loan amount, term, interest rate, repayment costs and schedule, security, and eligibility criteria. A business loan could be a good idea when you want to:

• Start a new business or expand an existing one
• Purchase or lease equipment, inventory, vehicles, or property
• Invest in research and development, marketing, or innovation
• Refinance, pay off debts or cover unexpected expenses
• Manage cash flow or working capital.

2. What loan type could help boost your business cash flow?

Different loans suit different needs and business goals. Some key considerations to keep in mind:

• Why do you need the money and how much do you want to borrow? 
  
• How will you pay it back, and can you pay off the loan sooner by making additional repayments?
• Could you offer commercial property or other assets as security if needed?
• What's your credit score, banking history and borrowing or financial limits?
• What are the costs, interest, and fees for each loan option?

Westpac offers a range of business loans to suit different needs and goals:

Term business loans

Lump-sum loans that are repaid over a specific loan term, usually with regular principal and interest or interest-only repayments. Term loans can be secured by an asset or unsecured and can have a fixed or variable rate.

Westpac offers 4 types of Business Loans: 

Secured Business Loan: Borrow from $10K¹ with a variable interest rate and interest-only or principal and interest repayment options (Establishment and other business loan fees apply).

Unsecured Business Loan: Borrow between $5K-$250K with a fixed interest rate and finance term of 1-5 years (Establishment and other business loan fees apply).

Startup Business Loan: Borrow between $10K-$50K with a fixed interest rate and finance term of 1-5 years (Establishment and other business loan fees apply).

Bank Bill Business Loan: Borrow from $250K using the BBSY rate, with finance terms of 30 days to 30 years (Establishment, line and other business loan fees apply).

Lines of credit 

These are revolving loans that allow a business to access funds up to a pre-approved limit whenever needed. They only pay interest on the amount used. Lines of credit can be secured by an asset or unsecured and usually have variable interest rates.

Westpac offers 2 kinds of Business Overdraft: 

Secured Business Overdraft: Borrow what you need¹ with a variable interest rate (Monthly line fee, establishment, and other fees apply).

Unsecured Business Overdraft: Borrow between $5K-$250K with a variable interest rate (Monthly line fee, establishment, and other fees apply).

Equipment finance 

These loans are specifically used to purchase or lease vehicles, machinery, or other equipment for business use. Equipment finance can take the form of a loan (chattel mortgage), lease, or hire purchase, or depending on the ownership and tax implications of the arrangement.

Westpac offers 5 types of finance for new or used cars/equipment:

You can choose to borrow from $15K with a fixed interest rate (establishment and other fees apply) and a finance term of:

• 1-7 years with a Business Car Loan, Business Equipment Loan, Finance Lease or Hire purchase.
• 1-5 years using salary sacrifice with a Novated Lease (new or used car only).

Other business finance  

Westpac offers other forms of finance to meet the specific needs of your business:

Invoice Finance: These are loans based on the value of your business accounts receivables. Accounts receivables generally involve outstanding invoices due within 30 to 90 days. Invoice Finance allows a business to receive up to 85% of the value of approved unpaid invoices, usually within 24 hours, without the need to provide assets as security. 

Insurance Premium Finance: Short-term finance that lets you spread a lump sum annual premium with monthly instalments. This can make it easier to manage by combining various business insurance premiums into a single financial agreement.

Bank Guarantee: A promise from Westpac that we'll pay your supplier or vendor if you can't. This way, you don't have to pay them a deposit in advance for things like renting a place or keeping some money aside. 

3. What should you consider before getting a business loan?

Before getting a business loan, you need to consider:

The amount and purpose of the loan 

Have a clear idea of how much money you need and what you’ll use it for. This will help you choose the best type of loan and lender for your situation. You should also avoid borrowing more than you can afford to repay, as this can damage your credit score and financial stability.

The interest rate, fees, business loan repayments and terms

Compare different loan options and look for the lowest possible interest rate and fees. Understand how long you must repay the loan and how often you must pay. You should also check if the loan has a fixed or variable interest rate and if there are any establishment or application fees, early repayment fees, default penalties, ongoing fees, or discharge fees. Choose a loan that helps you manage your cash flow and budget, allowing you to pay off the loan early without incurring extra costs.

The eligibility criteria and business loan requirements 

Ensure you meet the minimum qualifications and standards the lender sets for the loan, such as your credit score, income, business history, industry and financial statements. You should also prepare the necessary documents and information that the lender may ask for. Review your credit report, correcting any errors or inaccuracies that may affect your value assessments and chances of getting approved.

4. Who can apply for a business loan?

Generally, any business that meets the lender's eligibility criteria can apply for a business loan. However, the requirements may vary depending on whether you're an existing customer, the type and size of the loan, the industry and nature of the business, and the credit history and financial position of the business. 

At Westpac, some of the factors we base our business lending criteria on are:

• The purpose and amount of the loan
• The financial performance and position of your business
• The security and equity you can offer
• The industry and market conditions of your business
• Your credit history and repayment capacity.

5. What documents will you need for a business loan application?

Some of the documents you'll need to provide to get a business loan are:

Proof of your business income 

A profit and loss statement, balance sheet, or cash flow statement. These documents show how much income and expenses your business generates and how well it manages its finances. You may also be asked to show: 

• Personal financial statements: personal income, expenses, assets, and liabilities. To show your personal financial situation and how it affects your business.
• Business tax returns: your business's income, expenses, deductions, and taxes for the past two or three years. To show your business's profitability and tax compliance.
• Business account bank statements showing your business's cash flow, deposits, withdrawals, and balances for the past six to 12 months. To show your business's liquidity and financial stability.
• Business registration and licenses: your business's legal name, structure, ownership, and compliance with the relevant regulations and authorities. To show your business's legitimacy and credibility.

A business plan

Outlining your goals, strategies, market analysis, products or services, and projected income and expenses. To show how viable and profitable your business idea is and how you plan to use the loan funds.

A business credit report

Showing your business's credit history, payment behaviour, and credit score. To demonstrate how reliable and trustworthy your business is regarding repaying its debts.

Collateral 

Any asset or property you pledge to secure the loan that the lender can seize if you default on the payment. To show how much risk you’ll take and how much value you have to back up your loan request.

6. What factors could affect my application for business finance?

When a lender makes decisions regarding business finance, they decide based on what they can see or what has occurred in the past. So, the history of your company is critical. But what happens if your business has a bad credit history or no history or if you’re starting up and have yet to begin trading? What would a lender do, then?

Credit history

Like all lenders, Westpac will check your personal and business credit scores, which reflect your history of repaying debts and managing your finances. Bad credit can affect your ability to apply for a business loan, as it may indicate a higher risk of default. This may result in:

• Higher interest rates or fees:  increasing the cost of borrowing and the amount of money you must repay
• Lower loan amounts: limiting the funds you can access to grow or sustain your business
• Shorter loan terms: increasing the monthly payments and the pressure on your cash flow
• Additional collateral or guarantees: requiring you to pledge some of your personal or business assets as loan security or to have a third party who'll repay the loan if you can't.

Westpac may also offer you some alternative options, such as:

Business credit cards: a revolving line of credit that you can use for short-term expenses, such as inventory, supplies, or payroll. Business credit cards have higher interest rates than business loans but have more flexible repayment options and rewards programs.

Business equity loans: borrow against the value of your business or personal property, such as your home, car, or equipment. They have lower interest rates than unsecured loans but have higher risks, as you may lose your property if you fail to repay the loan.

Business grants or subsidies: non-repayable funds you can receive from the government or other organisations to support your business. Business grants or subsidies have no interest or fees but have strict eligibility criteria and application processes and may not cover all your business needs.

Trading history

Business loans for a startup business with no trading history can be challenging but not impossible. 

Here are some steps you can take to increase your chances of approval:

Prepare a detailed business plan: outlining your product or service, target market, financial projections, and marketing strategy. This will help assess your viability and potential profitability as a business.

Gather evidence of your personal and business credit history: if you have a good credit score and a history of repaying your debts on time, this will boost your credibility and trustworthiness as a borrower. You can also provide bank statements, tax returns, or invoices to show your income and cash flow.

Consider offering some form of collateral or security for the loan: such as property, equipment, inventory, or personal assets. This will reduce risk to the lender and increase your borrowing capacity. However, you may lose your collateral if you default on the loan.

Explore alternative sources of funding: grants, crowdfunding, angel investors, or venture capitalists. These can supplement your loan application and demonstrate your market validation and traction. 

7. How do you apply for a business loan?

Every lender will have their own application process. Online lenders may claim to be faster, but your ability to ask questions or tailor a solution with multiple finance options may not be feasible. Further, more complex businesses with greater financing demands may require more work and therefore a longer approval process. That's why it's important to seek independent professional advice before you make a final decision.

To apply for a business loan with Westpac, you need to follow these steps:

Choose the type of loan that suits your needs and check if you meet the eligibility criteria

You can compare the different loan options on the Westpac website or talk to a business banker for advice.

Prepare your financial documents and business plan

You’ll need to provide your income, expenses, assets, liabilities, cash flow, and future projections. You’ll also need to explain how you intend to use the loan and how you’ll repay it.

Submit your application online, over the phone, or in person at a branch

You’ll need to provide your personal and business details, financial documents, and business plan. You may also need to provide some security for the loan, such as property, equipment, or guarantors.

Wait for the approval and receive the funds

Depending on the type and amount of the loan, the approval process may take from a few hours to a few days. Once approved, you'll receive the loan contract, and we'll transfer the funds to your account or directly to the equipment supplier.