How to Secure a Business Loan as a New Business

How to Secure a Business Loan as a New Business
Before you apply for a loan for your new business, here's what you need to know.
by Square May 20, 2021 — 3 min read
How to Secure a Business Loan as a New Business

This article is for informational purposes only and does not constitute legal, accounting, or tax advice. The information contained herein is subject to change and may vary from time to time in your region. For specific advice applicable to your business, please contact a professional.

As a new business, securing finance can be challenging. Banks are notoriously strict about lending to startups, so you’ll need to do some serious pre-work before you lodge a loan application to give yourself the best chance of having your business loan approved.

Before you apply for a loan for your new business, you should ensure you:

1. Are clear on why you need a business loan and what you can afford. Access to finance can give your startup a real boost – but you need to be able to meet your repayment obligations. Speak with your accountant about why you need business finance, what’s a sensible amount to borrow, and ensure you’re confident that you can service the loan into the future.

2. Understand your finances. Your accountant or a bookkeeper may take care of your accounts, but you should still have a basic understanding of your finances. A cash-flow statement provides a good snapshot of the money moving into and out of your business.

3. Prepare a business plan. Most lenders will want to see a comprehensive business plan before they agree to give your small business a loan. The Australian Business Government website has a helpful guide to developing your business plan.

4. Have your paperwork prepared. Once you’re ready to approach your bank, pull together your proof of identification (passport, driving license, etc.), personal financial information, proof of your business’s financial position, financial forecasts, and your business plan.

Why do you need a small business loan?

As a new business, you may need finance to assist with:

Developing your concept. Startups often need funding to help them take their new business idea from a concept to a market-ready product or service. The product development process can be time-consuming and expensive, and often takes place before your business is making money.
Covering operational expenses. Depending on your size and operating model, you may need to pay for expenses including premises, staff, utilities, technology, insurance and more.
Marketing your product. Finding customers is one of the biggest challenges new businesses face. Your business plan should identify your target market – but how will you reach these potential customers when you launch? Popular channels for marketing your new business include email marketing, social media, online advertising, partnering with influencers and PR outreach. Traditional options like brochures and letterbox drops can also be effective, particularly if your product or service is most suited to a specific local area.

Cash flow can often be lumpy for startups, which is why sourcing external funding via a small business loan or another finance facility can be a sensible option.

What are the most common types of business funding?

Two of the main types of finance available to small business owners are:

Both debt and equity finance have advantages and disadvantages. The type of finance you choose for your small business could have a significant impact on your cash flow and tax obligations, so you should seek advice from your accountant before making a decision.

What are the most common finance options for small businesses?

There are a variety of funding options for new businesses:

Regardless of the business finance option you choose, ensure you check the product disclosure statement and terms and conditions carefully before you apply.

If you’re a new business looking to secure extra working capital, you have plenty of finance options – which can be both helpful and overwhelming! Speak with your accountant or financial advisor about the best finance options for your new business. You might also ask them to help you get your loan application in order before you submit it to give yourself the best chance of being approved.

Square Loans can help your business in your journey of growth. Discover more about how to apply for Square Loans today.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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