Tara Porter

Need to borrow money for your business? Luckily, there has been an increasing number of alternative business finance options in the marketplace, including online. However even with all these additional options, it can still be difficult to get the funds you need. Much of it comes down to a solid business loan application. The US Small Business Lending Index, which trends similarly to Australian business lending, showed that in 2017, lenders denied a little under half of their business loan applications.

So what makes or breaks an application?

In one word: risk.

Lenders want to make sure that they can bet on you and your business, which means you pose as few risks as possible.

Knowing the potential risks you pose and showing how you can account for them in your loan application can help up the odds that you’ll get the business loan you need. To help you build a solid loan application, we’ve put together a list of the primary risks that lenders consider.

1) Your Personal Experience

One factor that impacts the likelihood of you receiving a business loan is your own personal experience. If you are just breaking into the clothing industry, the odds of you receiving a business loan are significantly lower than someone with over 20 years of experience in that same industry. While there is nothing that you can do to change that (unless you could turn back time and join that industry sooner), it is worth considering before applying for a business loan.

2) Your Security

When assessing your risk, lenders consider what security you may offer in the event that you cannot repay your loan. For example, they would want to know if there is a property they could take (whether it be your office or home). The more security you have, the more willing they are to lend to you.

3) Cash Flow Risk

Lenders also look at how capable you are of making the regular loan payments. This is why providing a solid profit and loss statement and cash flow budget is key to a strong application. You will want a clear understanding of how much cash that you have left after expenses, excluding income, that you could use to repay the loan. While a higher cash flow risk might not necessarily deter them from giving you a loan, it could significantly impact your interest rates.

4) Business Risk

In addition to your cash flow risk, lenders also consider your business risk. With a business risk, they will look at your ability to pay off the entire debt. This takes into account other debts which you might have.

It is also important to note that lenders are unable to lend to a business that already has a tax debt.

5) Startup Businesses

Unfortunately, startup businesses have a tougher time receiving a business loan. Lenders consider businesses under a certain age to be high risk and therefore decline funding. They tend to prefer businesses over 3 years old and definitely not under 9 months old.

If you are a startup business, then how can you get funding? Since you can’t add years to your business without the gift of time, you may want to consider other funding options. Some startups use a business credit card in their early stages.

6) Weakening Industry

Another risk factor to consider is if you are in a weakening industry. For example, if you plan on making it big selling telephone landlines during a booming cell phone era, your odds of securing a loan might be low. While you can’t necessarily change this factor (without completely changing your business), you could demonstrate how you intend to thrive in a weakening industry.

7) Seasonal Business

Having a seasonal business (for example, a construction company) also appears high risk to lenders. They want to know how you will pay them in the lean months when sales are low.

While having a seasonal business could make you a higher risk for lenders, your loan application could give you a fantastic opportunity to prove that you’ve accounted for the off-season time. Demonstrate how you will handle the change of cash flow during the off season and you will lessen their perception of risk significantly.


If you want to submit a strong business loan application, know the risks you pose and create a solid plan. Be detailed in what you intend to do with the funds and how capable you are of paying them off. With a solid plan, you’ve upped the odds that you’ll get the funding you need.


1. https://www.business.vic.gov.au/money-profit-and-accounting/raising-capital/small-business-and-commercial-loans
2. https://www.lend.com.au/small-business-loans
3. https://www.canstar.com.au/business-loans/
4. https://www.homeloanexperts.com.au/business-loans/
5. https://www.federalreserve.gov/publications/2017-september-availability-of-credit-to-small-businesses.htm
6. https://www.tradefinanceglobal.com/posts/australian-small-business-financing-in-numbers/

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