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

Published Monday 27 October 2025

Table of contents

• What you need to prepare for your loan application
• Choose the right business loan type
• How much you can borrow
• The bank wants to approve you
• What you'll need
• Get your story right
• Presentation matters
• Understand loan terms and costs
• Or you can forget all about the paperwork
• Modern lending alternatives
• Make your application work harder with the right tools
• FAQs on applying for business loans

Key takeaways

• Prepare comprehensive documentation including 2-3 years of financial statements, current P&L and balance sheets, business plans with 12-month projections, tax returns, and bank statements to avoid application delays and demonstrate repayment capacity.

• Choose the appropriate loan type based on your specific funding needs, whether it's a term loan for large purchases, a line of credit for cash flow management, or equipment finance for asset purchases.

• Present your financial data visually using charts and graphs rather than raw spreadsheets, as visual presentations significantly improve approval rates by making business performance immediately clear to lenders.

• Consider modern digital lending platforms that connect directly to your accounting software for faster approval times of 24-48 hours instead of traditional weeks-long processes.

What you need to prepare for your loan application

Before you approach a lender, make sure your finances are organised. A strong application is built on a clear understanding of your finances and a solid plan for the future. Start by reviewing your financial health to see where your business stands.

Then, prepare a business plan that tells a clear story of where you're headed and how the loan will help you get there. This preparation not only improves your chances of approval but also gives you confidence in the decisions you're making for your business.

Choose the right business loan type

Not all business loans are the same. The right loan type for you depends on how you plan to use the funds. Here are a few common types:

• Term loans: A lump sum of cash that you pay back over a set period. You often use term loans for large, one-off purchases like property or equipment.
• Line of credit: A flexible option that gives you access to a pool of funds up to a certain limit. You only pay interest on what you use, making it ideal for managing cash flow or unexpected expenses.
• Equipment finance: A loan specifically for purchasing business assets, where the equipment itself often serves as security for the loan.

How much you can borrow

The amount you can borrow depends on the lender's assessment of your business's ability to make repayments, which involves applying criteria like a minimum serviceability buffer to ensure you can handle the debt. They'll look at several factors, including your revenue, profitability, cash flow, and credit history.

Having organised, up-to-date financial records makes it easier for lenders to see the true health of your business, which can help you secure the funding you need. While there's no magic number, a clear financial picture is your best tool for maximising your borrowing potential.

The bank wants to approve you

Lender approval depends on presenting a clear business case that demonstrates repayment ability. Lenders want to approve your application if you meet their criteria, because successful loans benefit both you and the lender.

To improve your approval chances:

• Present clear financials: Present organised, accurate accounts that show your business performance
• Demonstrate repayment capacity: Explain how the loan will generate future revenue to cover repayments
• Simplify decision-making: Provide complete documentation so you make it easy for the lender to approve your application
• Tell your business story: Explain your business model clearly, as lenders may not know your industry as well as you do

What you'll need

Required documentation proves your business's financial health and repayment ability. Missing or incomplete documents are the most common cause of application delays.

Essential documents include:

• Financial performance: P&L statements and balance sheets from the past two to three years to show profitability trends and historical financial performance.
• Current position: Up-to-date financial statements demonstrating recent business performance
• Future plans: Business or project plans with at least 12 months of projections explaining how you'll use the loan and generate returns to service the debt.
• Income verification: Tax returns that confirm your reported business income
• Banking history: Bank statements showing cash flow patterns and account management

Get your story right

Professional application preparation significantly improves approval rates by presenting your business case in terms lenders understand and trust.

Benefits of professional help:

• Lender perspective: Accountants understand how banks evaluate risk and structure applications accordingly
• Proven experience: Financial professionals know which information to emphasise and how to present it
• Increased credibility: Bank managers have more confidence in professionally prepared applications
• Online accessibility: Many accountants offer remote loan application services for convenience

Consider professional help if you are:

• First-time loan applications
• Complex business structures
• Significant loan amounts
• Previous application rejections

Presentation matters

Visual financial presentation significantly improves loan approval chances by making your business performance immediately clear to decision-makers.

Effective presentation strategies:

• Use charts over tables: Visual data is faster to interpret and more memorable than spreadsheets
• Show trends clearly: Growth charts demonstrate business trajectory better than raw numbers
• Leverage software tools: Modern accounting platforms generate professional charts automatically
• Create manually if needed: Hand-made visuals still outperform data tables for impact
• Focus on key metrics: Highlight revenue growth, profit trends, and cash flow patterns

Understand loan terms and costs

A loan is more than just the principal amount. It's important to understand all the associated terms and costs before you sign, including technical details like the accounting rules for classifying loan liabilities on your balance sheet. Pay attention to:

• Interest rates: Is the rate fixed for the life of the loan, or is it variable, meaning it could change over time?
• Fees: Look out for application fees, ongoing service fees, or early repayment penalties.
• Loan security: Lenders may require you to offer an asset as security, such as property or equipment. Make sure you understand what's at stake.

Or you can forget all about the paperwork

Modern accounting software eliminates manual document preparation by generating loan-ready reports instantly. This speeds up your application and increases lender confidence.

Here are some key advantages:

• Instant report generation: Income statements, expense reports, and growth trends available on demand
• Real-time accuracy: Bank feed integration ensures data accuracy, building lender trust
• Professional presentation: Standardised financial reports that lenders recognise and trust
• Faster processing: Complete, accurate documentation reduces application review time

Modern lending alternatives

Digital lending platforms offer faster approval by connecting directly to your accounting software, eliminating traditional paperwork and reducing approval times from weeks to days.

Here’s how digital lending works:

• Direct data connection: Your accounting software shares financial data automatically with approved lenders
• Rapid assessment: Algorithms analyse your business performance and approve loans within 24-48 hours
• No prior relationship required: Strong financial data replaces traditional banking relationships
• Future-focused evaluation: Lenders prioritise business trends and growth potential over historical credit scores

Key advantages:

• Speed: Days instead of weeks for approval
• Convenience: No manual document submission
• Data accuracy: Automated data transfer eliminates errors
• Accessibility: Available to businesses without existing bank relationships

Make your application work harder with the right tools

Getting finance used to be time-consuming. Now, modern accounting tools provide clean, validated data so lenders can make quicker decisions – with much less effort from you. With Xero, you can generate up-to-date reports, create compelling visualisations of your performance, and connect directly with online lenders.

By keeping your books organised in Xero accounting software, you simplify your day-to-day admin and build a strong foundation for future growth. When you apply for a loan, you will have everything you need ready to present a strong case.

However you apply for a loan, make sure you understand your options and choose the right finance for your business goals. Always consult your financial advisor to ensure the loan supports your plans for growth.

Ready to streamline your finances and improve your loan prospects? Try Xero for free and see how organised books can make all the difference when it's time to secure funding for your business.

FAQs on applying for business loans

Here are answers to a few common questions about getting a business loan.

How much deposit do you need for a business loan?

There's no single answer, as it varies by lender and loan type. Some loans may not require a deposit at all, especially if you have strong financials or can offer other security. If you keep your records up to date, you can often secure a loan on more favourable terms.

What is the easiest small business loan to get?

The easiest loan depends on your business’s circumstances. Online lenders that connect to your accounting software can offer a faster, simpler process because they use your real-time data to assess your application. This can be a great option for businesses with a solid trading history recorded in their software.

What's the easiest way to get approved for a business loan?

The best way to improve your chances of approval is to be prepared. This means having a clear business plan, accurate and up-to-date financial records, and a good understanding of why you need the funds and how you'll pay them back. Using Xero accounting software makes this preparation much simpler.