New businesses, small ventures in particular in Australia, are faced with numerous obstacles of getting off the ground due to the challenges of capital. The Small Business Credit Survey has revealed that about 22% of business owners have approached lenders in 2014 to apply for finance, and 54% of these aspiring businessmen have been denied the commercial loans. One of the obstacles of commercial loan application is that the business owners found the process time-consuming and exhausting.
Although Australia has a wide range of commercial lenders, business owners still find it hard to secure the best loan for their enterprises. Such failures are often attributed to some common obstacles associated with the commercial loan application and can be solved with the best negotiator. Click here to overcome these obstacles.
Take a look at some obstacles faced when applying for commercial loans:
- Finding the best deal – Financing is a major issue and can be a major setback of the failure of many small businesses. Each business or business owner has got unique financing needs, and thus requires the best deal. Lenders are in for profit and strive to minimize risks. As thus, you find the commercial loans charging unaffordable rates that are burdening on emerging small businesses.
One needs to circumnavigate the various lenders to find the best deal above all. And without the experience with the criteria to use in locating the best lender, you might either fall for higher interest rates or face rejections based on insufficient financial security or other factors. This necessitates the need for a competitive mortgage broker to help you find the best deal.
- Bad credit – bad credit is one of the obstacles you will face when applying for the commercial loans. A bad credit signals the lenders that you are unable to commit yourself in repaying debts. Especially the strict and larger lenders, they do not have lenience on a poor credit bound with the small business owner or the business itself. Even a single default on your previous loan repayments can have a major setback on your chances of being granted the commercial loan. In such cases, you have to fix your finances before assigning the broker in finding you the best commercial loan deal.
- Documentation – A huge percentage of business owners have their loan applications rejected or delayed indefinitely because of poor documentations. The process in itself can seem tedious because the lender wants the assurance and security before the loan can be granted. That is why the process is demanding beyond the tolerance of some business owners.
A range of business documents such as cash flow, income and balance statements, business plans, salary slips and tax information may be requested depending on the type of the lender. Because this compilation and submission of documents needs an experienced person, business owners often task the brokers to do that on their behalf. The broker will first search for the perfect lender for your situation and compile application documents in line with that particular lender. The process may end up being fruitful and expedited.
- Cash Flow Challenges – no any particular lender can be willing to grant you a commercial loan if it surfaces that you have cash flow problems. Even if you convince them that the loan will establish potential profit or generate growth, that is still a red-flag that can doom all your possibilities. Unfortunately, this is the obstacle that you need to fix on your own before considering a commercial loan.
- Insufficient collateral – Lenders demand collateral in commercial loan applications. Not having enough collateral is already an obstacle in finding the best loan. But it differs from one lender to another that what the value of the collateral is needed. A business broker can search diverse financing options to locate the reasonable lender with minimal collateral requirements that meet your needs.
One other obstacle of business owners is to rely on collaterals that depreciate in value than what they would be required to secure the loan with. For example, a vehicle bought at $60 000 a year back may cost $35 000 today. Real estate value is popular collateral that lenders prefer due to the appreciating nature of the value.
It is important that you familiarize yourself with these small business obstacles and then fix them before applying for any commercial loan. More importantly, find the best mortgage broker specializing in commercial loans to locate you the best deal.