Looking to secure a business loan but not sure where to start? Here’s how to improve your chances, avoid costly mistakes, and borrow with confidence.
When you’re running a small business, access to funding can be the difference between growth and stagnation. But applying for a business loan can feel like trying to crack a secret code — and getting it wrong can be costly.
Whether you’ve been turned down before, or you’re just starting to explore your options, this guide walks you through everything you need to know to secure the right business loan, at the right time, without the stress.
Why Getting a Business Loan Isn’t as Straightforward as You Think
Let’s be honest — no one teaches you how to get a business loan when you start your business. You’re told to have a good idea, work hard, and manage your money. But then you apply for a loan and suddenly it’s all about cash flow ratios, credit scores, and bank statement reviews.
“I thought our turnover was strong — but the bank said no. It felt like a punch in the stomach.” — said one of our clients.
Sound familiar? If so, you’re not alone.
Securing a small business loan isn’t just about profit. It’s about how well you can prove that you’re safe to lend to— and that requires some prep work.
🧠 Step 1: Know Your Borrowing Capacity
Before you even start comparing lenders, figure out how much you can safely afford to borrow. Most major Australian banks and also Smart Money have free tools on their websites that let you calculate borrowing power based on your income, expenses, and liabilities.
👉 Try Smart Money Loan Calculator
Once you’ve got an estimate, go one step further. Look at your own cash flow forecast and ask:
“How much can I repay every month without affecting wages, rent, or future investments?”
Now compare that to what the calculator said. If your budget says $1,200/month but the calculator says you can afford $1,800/month — trust your number. Overborrowing is one of the biggest traps small business owners fall into.
🔍 Bonus Tip: Clear Small Debts
If you have a small loan — like a car loan with only 6 months left — consider paying it out. The outstanding balance may be low, but that monthly repayment could be hurting your borrowing capacity. Paying it off in advance gives you more borrowing capacity, makes your financials look cleaner and can unlock better loan offers.
💸 Step 2: Avoid High-Interest Lenders
If the interest rate on a loan is more than 5% above the Reserve Bank of Australia’s (RBA) cash rate, it’s considered high-cost finance — and that’s a big red flag.
It might be tempting to take quick finance when cash is tight, but these loans are often designed to keep you paying for longer. That’s what we call the loan treadmill — you’re moving, but you’re not getting ahead.
💬 “We were offered $25K within 24 hours. But the interest rate was 18%. If we hadn’t looked closely, it would’ve cost us almost double.” — A2B client, Redlands
Stick with reputable lenders and speak to a professional about lower-risk options.
📊 Step 3: Get Your Financials in Order
Before you apply for a business loan, lenders will check:
- Your personal and business credit score
- The last 6 months of your bank and credit card statements
- Any Buy Now Pay Later (BNPL) or cash withdrawals from gaming venues
Yes, that’s right — even where you withdraw cash matters. One of our clients, a club employee, withdrew her wages every week from the same venue’s ATM. A lender assumed she had a gambling problem and rejected the loan — even though she wasn’t even allowed to play the pokies there.
If you use BNPL services like AfterPay or Zippay, reputable lenders offering low interest loans, will consider that you cannot live within your means. Be sure to not use these in the six months leading up to your loan application.
Check Your Credit Rating (free)
You can check your credit report for free with services like:
Look for any errors or missed payments, and fix them before you apply. Keeping your finances clean for 3–6 months can make a huge difference.
📁 Step 4: Prepare a Clear Loan Application
When applying for a small business loan, include:
- A clear loan amount and purpose (e.g. $40K for equipment that will increase capacity by 30%)
- 12-month cash flow forecast with repayments included
- Business plan (short, 2–3 pages is fine)
- Up-to-date BAS, P&L, and balance sheet
Securing a business loan doesn’t have to be overwhelming—especially when you approach it with the right knowledge and preparation. By understanding your financial position, choosing the right type of loan, and presenting a clear, confident application, you dramatically improve your chances of approval.
Remember, lenders want to see that you’re in control of your business finances and that their investment in you is a sound one. Whether you’re just starting out or planning your next growth phase, having a solid plan, clean records, and realistic projections will always work in your favour.
At the end of the day, the goal isn’t just to get approved—it’s to secure the right loan that helps your business thrive without placing unnecessary strain on cash flow.
If you’d like personalised support reviewing your loan readiness or business plan, feel free to reach out—we help Australian small businesses get loan-ready every day.
