Oct 5, 2018 8:36:03 AM

Simplifying Business Lending

Topics: Mortgages, NZ Mortgage Adviser, NZ Property Market, NZ Property, Small Business Lending, Business Finance 1

As a small to medium sized business owner, you may already have experienced the complexities that come with securing a business loan or funding for your business. Mountains of paperwork and number-crunching are usually followed by an endless wait on your lender’s decision. But the process needn’t be such an ordeal.

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Funding Your Business
In the past, securing business finance involved complicated and time consuming processes, with the business owner pulling together paperwork to prove their financial position, and the lender having to validate those figures through multiple sources.

While some business loan applications still involve long and complicated application forms and mountains of paperwork, modern accounting tools are making it that much easier for small to medium business owners to pull together validated data, which means lenders can make far quicker decisions about finance.

Securing a Business Loan
While lenders may be experts in finance, they’re not necessarily knowledgeable about your area of business. So before you start your application, it’s vital you make it easy for them to understand your business by demonstrating in the simplest way how the loan will be used and, more importantly, how it will be repaid. That means presenting an organised, accurate and easy to understand explanation of your accounts.

Preparing Your Documentation
When applying for a business loan, you’ll need to have:

• Income statements and balance sheets for the past two years.
• Up-to-date financial statements.
• Business plans or project plans to show the direction your business is taking.
• Tax returns to verify your income statements.
• Bank accounts, also for verification.

Some of the things you’ll need to show in your documentation include:

• How much it’ll cost to set up, buy or expand the business, including what stock, equipment, set-up costs or working capital you’ll need.
• How much you think you’ll need to borrow, and how much you’re contributing yourself.
• What you’ll use to secure the loan.
• If you’re applying for finance to lease premises, what the lease terms are.
• If you’re buying a new business, whether there is a restraint of trade and a turnover warranty.
• How you intend to repay the loan.
• If you’ve got any other sources of income you can use to repay the loan, or any other debt.

Understanding Your Lender
There’s more to securing a business loan than simply approaching your bank with your financial statements. Understanding how your lender evaluates risk, what sort of arguments they respond well to, and being prepared ahead of time with the right paperwork go a long way towards a successful application.

That’s where a Mortgage Express adviser can assist you. Mortgage Express advisers have considerable experience working with our panel of lenders. We know exactly what lenders are looking for in potential borrowers and can match you up with the right one.

As always, it’s best to consult your financial adviser before making any decisions about your business finance, to ensure you’re getting the best options that will help move you closer to your business goals. Talk to our team about the range of business finance options we have access to, to find the right finance solution to fit your business needs.

References:
https://www.xero.com/nz/resources/small-business-guides/business-management/apply-for-business-loan/
https://www.business.govt.nz/getting-started/funding-your-business/borrowing-money/
https://bizhub.anz.co.nz/resources/applying-for-business-finance.aspx

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While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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