How to apply for a business loan

Applying for a business loan can be an ordeal. Here’s how to simplify the process – and improve your chances of success.

A food delivery business owner applying for a business loan

Getting business loans can be a chore

Need some extra cash to take your business to the next level, but daunted by the loan process? You're not alone. There's a lot of paperwork and number-crunching involved. And after all that effort, you may have to sweat on the bank's decision for ages.

Fortunately, the business loan process is getting better. Progressive lenders, and online accounting, are breaking down a lot of the traditional barriers.

The bank wants to approve you

Before you get started, remind yourself that banks actually want your application to succeed. The interest you’ll pay is a vital revenue stream for them. They want to give you the money. It’s up to you to make their job easy by turning up with a good business case.

Connect the dots for them. While banks are experts in money, they’re not necessarily knowledgeable about your area of business. You’ll need to demonstrate very clearly how the loan will allow you to make money in the future and pay back the loan. Present a very clear story.

Also, don’t forget that your bank manager will often need to get their boss to approve your loan. Give them everything they need to make that a straightforward conversation. That starts with your accounts, which should be organised, accurate, and easy to understand. Walking into a bank with a shoebox of invoices and complicated spreadsheets just isn't going to work.

What you’ll need

When applying for a business loan, you should generally have:

  • P&L statements and balance sheets for the past two years
  • up-to-date financial statements
  • business plans or project plans to show the direction your business is taking
  • tax returns to verify your income statements
  • bank accounts, also for verification

It’s a lot of paperwork, but banks can't make decisions without the right information. Many business loan applications get held up because applicants don't present the right information.

You can download our free P&L template, balance sheet template and business plan template so that you head to the bank with the information they need.

Or you can forget all about the paperwork

If you have modern accounting software, you won’t have to dig out all these documents. A smart system will produce the information on demand, including:

  • income and expense reports
  • growth trends
  • forecasts

And if you have your software set up with bank feeds – so that income and expenditure data flows directly from your business accounts – the person approving your loan will trust that the information is accurate. That level of confidence will help your cause.

Presentation matters

When asking your bank for a loan, forget about tables and spreadsheets. A picture paints a thousand words. Create charts and graphs that show how your business is tracking. It’s so much more compelling than handing them raw data and challenging them to interpret it. Clear graphical reports will make it much easier for your bank manager and their boss to evaluate your application.

Again, accounting software will make this simple because you can lift charts and graphs from your dashboard. If you don’t use an accounting package, take the time to make the graphs manually. The visuals will help cement the opportunity in the minds of the decision makers.

Get your story right

When applying for a loan, you’re aiming to convince the bank that your business is a good bet. To do this, you’ll want to know a little about how they think. How do they evaluate risk? What sorts of arguments do they respond to? Which arguments are weak? Then you can form a story that puts your business in the best possible light.

An accountant can help you do that. They prepare lots of loan applications so they know what you should include in your application, and how to present it. Plus your bank manager will have more confidence in an application that a financial professional has helped prepare.

If you don’t have an accountant or bookkeeper, don’t feel bad about hiring one for this process. They’re often approached to help businesses get access to finance. You may not even have to visit their office, if you don’t want to. Many can do this sort of work online.

Instant lending

If you’ve made the switch to cloud accounting, you may not have to go through such a formal loan application process. Some lenders can assess your application online and give you faster access to capital.

You send data from your accounting software online to the lender and they evaluate your loan application within days. You don’t even need to have a prior relationship with them. The quality and integrity of the data in your accounting software gives them all the security they need to make a quick decision.

These types of lenders are more interested in the future of your business than its past. They don’t need to see your credit score, for example. Instead, they'll focus on your collateral and use the analytical tools built into your accounting software to understand your business and its prospects.

Online lenders will generally want to see:

  • that you're making a profit, or projecting to make one soon
  • what assets you have
  • that you have a credible management team in place

Finance options

If you use an online provider, you’ll generally get a credit line rather than a loan. Credit lines work like an overdraft or credit card. The lender gives you access to an agreed amount of money but you don’t have to use it all – and you pay a monthly payment on what you actually borrow.

For example, you may apply for a credit line and be granted a limit of a million dollars. If you only use half of that, you'll only pay interest on half. It gives you the liquidity and flexibility to run the business the way you need to.

Business borrowing is getting simpler

Getting finance used to be hard for everyone. Business owners had to pull together mountains of paperwork to prove their financial position. The bank had to ask for information from multiple sources to make sure the data was valid.

It was time-consuming for them and gruelling for you. Some business loan applications are still like that. However, modern accounting tools provide clean, validated data that allow lenders to make far quicker decisions – with much less effort from the applicant.

But no matter how you apply for a loan, or who you use – never take lending lightly. It might get easier to take on debt but that doesn’t mean you should. Always consult your financial advisor and make sure the loan will move you closer to your business goals.


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.

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