Bank loans

Banks want to provide loans to businesses who are solvent and profitable. Generally they consider lending to one-person operations or new businesses without solid track records as high risk.

You need to show the bank that a loan to you is a low risk proposition. To improve your chances of securing a bank loan, thorough planning and management is essential.

Each financial institution has its own criteria for assessing applications. Generally you will need to provide a comprehensive and well supported business plan, accurate financial forecasts and collateral to match the value of the loan.

There are a number of websites like Canstar, Finder and InfoChoice, which make it easy to compare interest rates and financial products. Just be aware that comparison websites may have commercial arrangements with financial services companies.

Loan assessment

Many banks use an initial basic assessment known as the 3Cs: character, cash flow, and collateral. How do you measure up to these:

  • Character: relates to your past commercial experience, your skills and abilities. The bank manager will assess whether you can actually do what you want to do.
  • Cash flow: refers to the cash “ins” and “outs” of the business which should be realistic, showing that sufficient funds can be generated to cover any loan requirements.
  • Collateral: refers to what you are offering as security against any potential loss by the bank.

Risks involved

Both the lender and the borrower face risks when money is borrowed.

  • The lender’s risk is that the loan won’t be repaid, will be paid late, or that it will cost a lot of time and money to collect payment.
  • The borrower’s risk is that they won’t be able to make the repayments, and the lender will call in their security, or sue for recovery of the monies outstanding.

It is strongly recommended you seek professional advice from your business advisor and lawyer before entering into any contract.

What’s next…

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Related Information

Top Tips

  1. Improve your chances of success with these key points for preparing an application for finance.

  2. Take charge of your finances with the help of our step-by-step workshop Understanding Your Business Financials

  3. Get help and call 13 12 49 or email us to speak with a specialist small business adviser – or visit us and make the most of our one-stop service.

  4. Business Basics will provide you with an overview of all the key points you need to consider, along with hints and tips on where to find more detailed information and advice.

  5. Sign up for our monthly e-news, which brings you all the latest from the SBDC and the West Australian small business sector.


From free Business Basics workshops to more specialised workshops and one-to-one advisory sessions, we can provide support – directly and through our partner organisations.