Small Business Start-up Loans

Taking the plunge into a new business venture is both exciting and daunting. On the one hand, you’ll finally be in charge; you’ll be the master of your own destiny, chasing achievement in a field that you actually care about. On the other hand, you now have a laundry list of items to check off before you begin to ensure that everything goes smoothly. Working for someone else relieves these responsibilities, but the company owner is responsible for all of them.
Lots of Australians dream about owning their own business. However, the first challenge for many of these new business owners is the lack of funding. Typically, business owners don’t have enough business experience and find it difficult to obtain finance.
Starting a business with no money is a difficult prospect, regardless of your industry. However, starting a business presents several unique challenges that you need to overcome. No matter how you look at it, starting a business will cost money. What’s key here is that you understand exactly how much you will need.
Small business loans are not easy to secure. Poor credit history or no business credit history and low cash flow can prevent small businesses from securing loans. Your credit score and work history will be taken into consideration, so it’s helpful to have good credit and have experience in the field you’re entering.

How do you apply for a business loan?

To most lenders, new businesses are placed under a high-risk category, lenders are more inclined to cater towards more well-established businesses that have demonstrated proven profitability within their full financial statements over the past 2-4 years.
When you apply for small business financing, it’s important to understand what information small business lenders need from you so you can gather the appropriate documents.

Typically, you will need to supply the following documents:

A business plan
Lenders want to see that you have a business plan and blueprint for continuous profit, showing them that you can repay the loan. This is especially important if your new business doesn’t yet have steady cash flow.  
Having a plan and sticking to it is much more attractive than spontaneity in the finance world. It also gives you a better chance of getting a business loan.

Lenders want to see that you have a well-thought-out plan for your business, applying for a loan with no business plan or with a half-baked plan will not bode well.

It isn’t uncommon for very small businesses not to have a formal business plan – or any plan at all – but you’ll still need to put in the time and work to develop a business plan. If you don’t have a documented plan in place, with financial information and projections, your chances of receiving even a small loan you want will dwindle. Consider seeking the advice of a business plan expert who can review it and offer feedback. You should also be prepared to explain how you plan to use the money you want to borrow. Applicants can position themselves much better by being able to call out exactly what they need and what they need it for.

Instead of asking for $60,000 in working capital, if an applicant says they need $10,000 for stock, $20,000 for business equipment, $20,000 for fit-out finance upgrades to their business and $10,000 for staff wages and advertising, the lender is much more confident in their ability to effectively deploy the funds. At the bare minimum, loan applicants should be prepared to explain why they want a loan and how they plan to repay it.

Financial information

Before applying for a business loan, make sure your financial documents are in order and that you understand what lenders need from you. This gives you a better chance of getting a loan. When applying for business finance, you (and any directors, partners or guarantors) may be asked to provide:

  • Financial statements, preferably prepared by an accountant
  • Two most recent years individual tax returns and an ATO Notice of Assessment.
  • Financial statement to show your asset, liability and net worth positions
  • Bank statements both individual and business
  • If you’re a new customer, you’ll need to provide identification such as your driver licence, Medicare card or passport.

Cash Flow Projections

Cash flow is another important factor for lenders because they want to ensure you have enough revenue and sales to pay them back. Your debt-to-income ratio is also vital – the more debt you have, the more difficult it will be to get approved. For new small business loans, lenders prefer a 1.35 debt-to-income ratio, which demonstrates you have a buffer built into your finances

If you’re not sure of your current financial position or capacity, sit down with an accountant or financial planner to help you gain the perspective you need and create an action plan to address any lacking areas.


Some lenders will request collateral. Collateral can take many forms – property, vehicles, stock, or any asset of value – but you must understand that if you fail to repay the loan, the lender will keep the assets you pledged.  Most loans require some form of down payment, and this is typically varied based upon the borrower’s financial history and the collateral put up for the loan. Based on this, most loans range from zero to 30% down payment for the loan.  

Common business start-up costs and expenses

Beyond the mandatory business start-up costs, there are a broad range of expenses that you will need to plan for. Some of the most common small business start-up cost examples include:

Salaries – Wages for your staff is probably the most important expense to consider. The national minimum wage is currently $20.33 per hour or $772.60 per 38-hour week (before tax). Casual employees covered by the national minimum wage also get at least a 25% casual loading. However, depending on what sort of roles you’re hiring for, you’ll probably need to pay considerably more to attract the level of talent you need to take your business to the next level.
Rent – Another significant cost to start-up a business that you need to consider is rent. The amount you can expect to pay will depend on where you’re renting, as well the size of premises that you need

Professional fees – You also need to think about the critical business functions that you may need to outsource, and the fees that go along with that. Paying legal and accountancy fees isn’t cheap, but it’s vital for businesses in the early stages to get the compliance and regulatory side right from the start, which could lead to a significant expenditure in professional fees.

Insurance – Even if your business’s risk protection needs are relatively low, it’s vital to pay for insurance. Some of the most useful types of insurance for Australian businesses include professional indemnity insurance, public liability insurance, and product liability insurance. The amount you’ll need to pay will depend on several factors, including your history of claims, the type of business you’re running, and the provider you choose to go with.

Things to consider

Failure to seek expert advice

When you apply for a business loan, lenders want to see that you’ve sought guidance from knowledgeable advisors. Accountants can be an important source of advice for small business owners.
It’s also recommended that business owners get financial advice from business networking groups.


It’s easy to forget there is an innately emotional component to this process as well. Too many business owners simply don’t demonstrate why they, rather than someone else, are a good candidate for a loan. They approach lenders with an apathetic attitude.
In addition to making a sound business case for why you should qualify for a loan, you need to exude enthusiasm and faith in your venture to draw in the lender and makes them a believer. To do this, you must tell a story about your business that the lender finds compelling. The more prepared, serious and passionate you appear around your business, the more trust a lender will have with approving you for the loan.



While tapping into your savings account isn’t ideal, it’s common for many start-ups to dig into their savings to start the business. When putting together your business plan, be honest with yourself about how much you’re going to spend and work out a budget.
Be realistic on how much revenue you’re likely going to bring in. Forecast how long it will take before you see some form of profit. 
It takes about six months on average before you may start seeing consistent results. Make it an intention to save at least six month’s worth of living expenses so you can dedicate yourself to your new business.

Can you KEEP your DAY JOB

You can reduce your financial risk by keeping your day job, even if it’s on a casual or part-time basis. When you are just starting out, having some stability can be a lifesaver.
While this does mean you will have less time to dedicate to your business, and that you may have to work harder, it means you can still put food on the table and pay your bills.
Try to allocate some savings aside each week in the lead up to your business launch. The money will help keep things ticking along until it starts to generate revenue. As your business grows, you’ll be in a better position

Start your journey

Starting a Managing a start-up business may be difficult, but the rewards are unlimited. Right from the time you get a spark or idea in your mind, up to the time you opened your new business, you should never forget your main motivation.

One of the best motivations for starting a business is enjoyment and freedom to do whatever you want. Never lose hope during your entrepreneurial journey.

DISCLAIMER: The information contained in this document is general in nature and should not be relied upon as legal advice. Berra finance does not warrant the accuracy or completeness of any representations made in the document or that the material is suitable for any purpose. You are responsible for assessing the material and seeking your own legal or financial advice. To the fullest extent permitted by law, Berra finance excludes all liability for loss or damage (including indirect or consequential loss or damage) which may be incurred in connection with your use of or reliance on the material contained in this document.

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