Why separate your business and personal accounts
If you’re looking to apply for a business loan, you can improve your future or immediate borrowing potential by being well prepared. We’ve spoken to Heritage Bank Head of Business Banking, Charlton Nevis for his expert tips on how to prepare yourself before approaching your bank for a business loan.
When applying for a business loan, the deeper your overall knowledge is of your business or prospective business, the more effectively and promptly a bank can consider your loan requirements.
A key consideration for a bank is having confidence in your business expertise across all aspects of either your existing business, your prospective business purchase or new business venture. They’ll also look at the quality of your supporting evidence, including both past and future financial performance records, business plans and details of your overall financial situation.
Maintaining accurate and up to date financial statements and records will ensure you have the evidence you need, to give your lender a clear understanding of your business income and trends. This will assist them to determine whether you can afford the proposed business loan. It also helps to separate your business and personal accounts.
Monitor your accounts closely and keep all your transaction accounts in order. Ensure there is no overdrawing, your loan repayments are up to date and that you maintain a good credit history.
Maintain a close and proactive relationship with your accountant or other professional advisers and discuss any proposed business plans initially with them. They may suggest a certain trading or ownership structure such as a Company or a Trust and highlight other key areas to think about. Having this information to discuss and provide to a bank during your application, will greatly assist with the application process and can reflect favourably on your business management skills.
Most lenders will check your current and past credit activity by contacting a credit rating agency. By checking your credit file you can keep a track of what information is stored and if the details are correct. You can order a copy of your credit file through credit bureaus such as Equifax or illion Australia.
These are just some of the ways you can ready yourself for a business loan application.
If you’re ready to apply, our Business Banking Lending Specialists are here to help. Alternatively, check out our Business Banking Help and Guidance Hub for more helpful information on starting your business and managing your business finances.