As commercial finance brokers with over 30 years of experience in the Perth market, we’ve created this comprehensive guide to simplify the process. We’ll walk you through each step of securing business finance, from identifying the right loan type to successfully managing your application.
The Business Loan Application Process: An Overview
Before diving into specific preparations, it helps to understand the overall process for securing business finance in Perth:
- Exploring finance options – determining which type of financing suits your needs
- Understanding assessment criteria – knowing what lenders will evaluate
- Preparing your application – gathering documents and defining requirements
- Submitting and managing your application – working with lenders
- Evaluating loan offers – reviewing terms before acceptance
- Responding to rejection – what to do if your application is declined
For most Perth businesses, working with an experienced business finance broker significantly streamlines this process and improves outcomes.
1. Exploring Your Financing Options
Starting your financing journey requires matching the right funding solution to your specific business purpose. Each finance type operates under different structures, security requirements, and repayment terms.
- Equipment finance:
- For purchasing machinery, vehicles, or technology
- Secured directly against the purchased asset, often with flexible end-of-term options (return, refinance, or purchase outright)
- GST is typically payable upfront but can be claimed back
- Business acquisition finance:
- For buying existing businesses or franchises
- Usually requires both business assets and personal guarantees as security
- Longer terms (5-10 years) and detailed business valuation documentation
- Working capital finance:
- For managing day-to-day operational expenses
- Generally unsecured with shorter terms (6-24 months) and higher interest rates
- Often feature revolving credit facilities that allow for repeated drawdowns
- Commercial property loans:
- For purchasing business premises
- Secured against the property with the longest available terms (up to 30 years)
- Lower interest rates but substantial deposit requirements (typically 20-30%)
- Line of credit facilities:
- For maintaining flexible access to funds
- Ongoing access to funds with interest charged only on the amount used, requiring regular reviews and renewal (usually annually or bi-annually).
- Invoice financing:
- For converting outstanding invoices into immediate cash flow
- Advances funds against unpaid invoices (typically 80-90% of invoice value), with the remainder paid (minus fees) once your customer settles the invoice.
The structure you choose affects your balance sheet, security requirements, repayment flexibility, and ability to access additional funding in the future.
If you’re unsure which option is best for your business, our team can help assess your needs and recommend appropriate solutions.
2. Understanding How Perth Lenders Assess Applications
Western Australian lenders have specific criteria when assessing business loan applications. We have outlined some of the key assessment factors below, which include:
- Business trading history in WA (ideally for the last 2 years as a minimum)
- The business’ current financial position and cash flow
- Industry sector performance and future forecasts
- Available security assets if applicable (commercial property, equipment, vehicles, etc)
- The credit history of the business and directors
Local market factors are also considered, including:
- Perth’s current economic conditions
- Your industry’s performance within the WA market
- Local competition and market share
- Any seasonal factors affecting the business
Whilst there are several factors to consider above, a broker can walk you through these when putting together your application, as they specialise in how to get finance for a business.
Pro Tip: Different lenders have varying risk appetites for different industries, so what might be declined by one lender, could be approved by another.
3. Preparing for Your Loan Application
To increase the likelihood of your loan being approved, take the time to prepare your documents and expectations before approaching any lenders.
Start by defining your funding needs clearly:
- Calculate exactly how much you need to borrow
- Document specifically how the funds will be used
- Understand what monthly repayments you can realistically afford
Then, gather the following list of documentation you’ll need for the application:
- Your business tax returns from the last two years
- Any recent business activity statements
- Current profit and loss statements and balance sheets
- Bank Statements (usually for the last 6 months)
- Your Business Plan (this is especially important for startups)
Pro Tip: Create a digital folder with all your documents ready to share, so your lender has access to everything they need without needing to follow these up with you.
4. Submitting and Managing Your Application
Typical Application Timeline
Understanding the timeframe for securing business finance can help you plan accordingly. While timelines can vary, you can typically expect:
- Initial consultation with a broker: 1-2 days
- Document preparation and submission: 1-2 weeks (depending on your readiness)
- Lender assessment period: 1-4 weeks (varies based on loan complexity and lender)
- Approval and formal documentation: 1-2 weeks
- Settlement and funding: 1-7 days
For urgent funding needs, some lenders offer expedited processes, though these may come with higher interest rates or fees. Your finance broker can advise on the most appropriate options based on your timeline requirements.
Managing Lender Queries
During the assessment period, lenders often request additional information or clarification. Responding promptly and thoroughly to these queries is essential for maintaining momentum in the application process. Your broker can help you anticipate common questions and prepare appropriate responses in advance.
5. Evaluating Loan Offers
Understanding Fees and Charges
Beyond the interest rate, business loans typically involve various fees and charges that impact the total cost:
- Establishment/application fees
- Ongoing account-keeping fees
- Early repayment penalties
- Late payment fees
- Valuation fees (for security)
- Break costs (for fixed-rate loans)
When comparing loan options, ask your broker to provide the comparison rate, which includes most fees and charges, giving you a better understanding of the true cost of the loan.
Common Loan Covenants to Be Aware Of
Business loans often come with certain conditions (covenants) that your business must maintain throughout the loan term:
- Maintaining a specific debt-to-income ratio
- Restrictions on taking on additional debt
- Minimum cash reserve requirements
- Regular financial reporting obligations
- Limitations on major asset sales or acquisitions
- Key person requirements
Understanding these covenants before accepting a loan offer is essential, as breaching them could trigger default clauses, potentially requiring immediate repayment of the loan.
6. What to Do If Your Loan Application Is Rejected
Loan rejections happen even to solid businesses. If your application is declined:
- Request detailed feedback from the lender about the reason
- Address the specific issues identified
- Consider alternative lenders with different assessment criteria
- Review your business plan and financial projections
- Explore whether a different loan structure might be more suitable
- Consider strengthening your application with additional security
- Work with your broker to identify more appropriate financing options
Often, a rejection from one lender doesn’t mean your business is unfinanceable – it may simply require a different approach or lender.
Alternative and Complementary Financing Options
In addition to traditional business loans, you may also consider exploring:
- WA government grants and incentives for specific industries or purposes
- R&D tax incentives for innovative businesses
- Export financing assistance for businesses selling internationally
- Equity financing through angel investors or venture capital
- Crowd-funding platforms for certain business types
These alternatives might complement traditional financing or provide better terms for specific business needs.
How a Commercial Finance Broker Can Help You Succeed
Partnering with an experienced commercial finance broker is one of the most effective steps you can take to navigate Perth’s complex business lending landscape. The right broker offers several key advantages:
- Market expertise: Access to lenders who specialise in your industry sector
- Time efficiency: Professional management of the application process while you focus on running your business
- Better terms: Negotiation of competitive rates and favourable conditions through established lender relationships
- Application optimisation: Presentation of your business case in the strongest possible light
- Rejection prevention: Pre-screening to identify and address potential issues before submission
For over 30 years, Southshore Finance has helped Perth business owners achieve their financial goals through our extensive expertise and established lender network. Our award-winning team understands that every business is unique, requiring tailored financing solutions rather than a one-size-fits-all approach.
If you’re ready to explore your finance options or need guidance through the application process, contact our Perth office today to arrange a no-obligation consultation.