How to get a business loan: Steps, lenders and what you need for your small business

Published Tuesday 4 November 2025

Table of contents

• Types of business loans
• Business loan requirements and eligibility
• What you'll need
• Preparing your business case
• Traditional vs online lenders
• How to choose the right business loan
• Finance options
• Getting the most from modern accounting software
• Frequently asked questions about business loans
• FAQs on business loans
• Streamline your loan application with better financial management

Key takeaways

• Prepare comprehensive financial documentation including profit and loss statements, balance sheets, and cash flow statements for the past three years, as missing or incomplete documents are the primary cause of application delays.

• Utilize modern accounting software with bank feed integration to generate instant, accurate financial reports that increase lender confidence and streamline the application process.

• Choose the appropriate loan type based on your specific needs—use a line of credit for flexible cash flow management, term loans for large investments, or equipment finance for machinery and technology purchases.

• Focus on demonstrating clear repayment capacity by showing how the loan will generate income and presenting organized financial records that prove your business's ability to service the debt.

Types of business loans

Business loans aren't one-size-fits-all. Lenders offer different products to suit different needs. Understanding the main types can help you find the right fit for your goals.

Term loan

This is what most people think of as a traditional loan. You borrow a lump sum of money and pay it back with regular payments over a set period, which for a term loan is generally between three to ten years. You often use a term loan for big investments, such as expanding your business or buying another company.

Line of credit

A line of credit gives you access to a pool of funds that you can draw from as needed, up to a certain limit. It works like a credit card, giving you flexibility to manage cash flow or cover unexpected costs. You only pay interest on the money you use.

Equipment finance

If you need to buy vehicles, machinery or technology, equipment finance can help. The equipment you buy usually secures the loan, which can make approval easier.

Business loan requirements and eligibility

Lenders look at several factors to decide if you can get a loan. They want to see that your business is a good investment.

Key factors include:

• business history – many lenders prefer to see a business that has been operating for a year or two
• revenue and profitability – you need to show your business generates enough income to make loan repayments
• credit history – both your personal and business credit scores can play a role, as your credit file contains details on applications from the past five years, overdue accounts, and other public record information
• collateral – some loans require you to offer an asset, like property or equipment, as security. This is known as a secured loan
• business plan – a clear plan that shows how you will use the funds and grow your business can build a lender's confidence
• Business history: Many lenders prefer to see a business that has been operating for a year or two.
• Revenue and profitability: You'll need to show that your business generates enough income to comfortably make loan repayments.
• Credit history: Both your personal and business credit scores can play a role in the decision, as your credit file contains details on applications from the past five years, overdue accounts, and other public record information.
• Collateral: Some loans require you to offer an asset, like property or equipment, as security. This is known as a secured loan.
• Business plan: A clear plan that shows how you'll use the funds and grow your business can build a lender's confidence.

What you'll need

Business loan documentation proves your financial stability and repayment capacity to lenders. Missing or incomplete documents are the primary cause of application delays.

You usually need to provide:

• financial statements – profit and loss statements, balance sheets and cash flow statements for the past three years
• current financial position – up-to-date statements to show recent performance
• business strategy – business or project plans that outline growth direction and loan usage
• income verification – tax returns to confirm reported earnings
• banking history – account statements to verify cash flow patterns
• Financial statements: P&L statements, balance sheets, and cash flow statements show profitability trends, and lenders will typically want to review this information for the past three years.
• Current financial position: Up-to-date statements demonstrate recent performance
• Business strategy: Business or project plans outline growth direction and loan usage
• Income verification: Tax returns confirm reported earnings
• Banking history: Account statements verify cash flow patterns

Download our free P&L template, balance sheet template and business plan template to ensure you have properly formatted documents.

Preparing your business case

Successful loan applications clearly demonstrate your ability to repay the borrowed money and generate future profits. Lenders want to approve loans because interest payments are their primary revenue source.

Your application must show:

• clear repayment capacity – how the loan will generate income
• organised financial records – clean, accurate accounting data
• compelling business case – why your business will succeed
• Clear repayment capacity: How the loan will generate income
• Organised financial records: Clean, accurate accounting data
• Compelling business case: Why your business will succeed

Bank managers may need to get approval from senior staff. Give them all the information they need to support your application.

Traditional vs online lenders

If you use cloud accounting, some lenders can assess your application online and give you faster access to funds.

You send your accounting data online to the lender, and they can review your application within days. You do not need an existing relationship with them. The quality of your data helps them make a quick decision.

These lenders focus more on your business's future than its past. They may not need your credit score. Instead, they look at your collateral and use your accounting data to understand your business.

Online lender requirements focus on future earning potential rather than credit history or extensive documentation.

They usually consider:

• profitability – current profits or realistic projections within 12 months
• asset security – equipment, inventory or property that secures the loan
• management capability – an experienced team with relevant industry knowledge
• Profitability: Current profits or realistic projections within 12 months
• Asset security: Equipment, inventory, or property that secures the loan
• Management capability: Experienced team with relevant industry knowledge

Find lenders that can approve your finance application online

How to choose the right business loan

To choose the right loan, think about your needs. Ask yourself these questions.

• What's the purpose? Are you covering day-to-day expenses or making a large, one-off purchase? A line of credit is great for cash flow, while a term loan is better for big investments.
• How much do you need? Be realistic about how much you need to borrow. If you apply for too much or too little, it can cause issues later.
• How quickly do you need the funds? Online lenders can often provide funds faster than traditional banks, but the terms might be different.
• What can you afford to repay? Look at your cash flow projections to understand what your business can handle in monthly repayments.

Finance options

Business credit lines provide flexible access to funds up to a predetermined limit, similar to a business credit card. Unlike traditional loans, you only pay interest on the amount you actually use.

Credit lines work like this:

• approved limit – a lender sets a maximum borrowing amount, and for loans more than $1 million, banks will often conduct annual reviews
• flexible usage – draw funds as needed for business operations
• interest on usage only – pay interest solely on borrowed amounts
• revolving access – repay and reuse funds throughout the term
• Approved limit: A lender sets a maximum borrowing amount, and for loans more than $1 million, banks will often conduct annual reviews.
• Flexible usage: Draw funds as needed for business operations
• Interest on usage only: Pay interest solely on borrowed amounts
• Revolving access: Repay and reuse funds throughout the term

This flexibility helps you manage cash flow and take advantage of new opportunities without paying for unused credit.

Getting the most from modern accounting software

Modern accounting software automatically generates loan application documents from your real-time financial data, eliminating manual paperwork preparation.

The main benefits are:

• instant report generation – profit and loss statements, balance sheets and forecasts created on demand
• verified accuracy – bank feed integration ensures data authenticity
• growth visualisation – automated trend analysis shows business trajectory
• lender confidence – real-time data increases approval likelihood
• Instant report generation: P&L statements, balance sheets, and forecasts created on-demand
• Verified accuracy: Bank feed integration ensures data authenticity
• Growth visualization: Automated trend analysis shows business trajectory
• Lender confidence: Real-time data increases approval likelihood

Bank feeds connect your business accounts to your accounting system, so lenders can see up-to-date financial information.

Frequently asked questions about business loans

FAQs on business loans

Below are answers to common questions about getting a business loan.

Which business loan is easiest for you to get?

Generally, loans that require collateral (secured loans) or have lower borrowing amounts can be easier to qualify for. Online lenders may also have more flexible criteria than traditional banks, often focusing more on recent cash flow than long-term credit history. However, easier loans may have higher interest rates, so check the terms carefully.

Who is eligible for a business loan?

Eligibility depends on the lender and the loan type, but they typically look for a stable business with a proven ability to generate revenue. Factors like your time in business, annual income, and credit score are all important. Startups may find it harder but can still get finance, especially with a strong business plan and some form of security.

Do I need a perfect credit score?

Not always. A strong credit score helps, but lenders also look at your cash flow, business plan and collateral. These can help you get a loan even if your credit history is not perfect.

Streamline your loan application with better financial management

Applying for a business loan can be simple. When your finances are organised and your story is clear, lenders are more likely to say yes. Modern accounting software makes the process easier by giving you accurate reports and real-time data.

By keeping your books in order, you're not just preparing for a loan – you're setting your business up for success. Ready to take control of your finances? Try Xero for free.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.