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Business loans: 5 things that could impact your eligibility

4-minute read

Whether you are looking to expand your business or simply need a quick cash flow boost, here are 5 factors you should consider when applying for business loans.

Key take-outs
  • Lenders may look at the five ‘Cs’ when considering a loan application: character, capacity, collateral, capital and conditions
  • Eligibility criteria may also include personal information, your lending history and other factors
  • While disclosing some information may be uncomfortable, it is necessary and important

Whether you are looking to expand your business or simply need a quick cash flow boost, there are several factors that can impact your business loan eligibility. Here are five examples that can help increase your chances of business loan success.

1. History and character

Your personal character and financial history as well as your business’s trading history are both relevant to lenders. They will look for evidence of whether you have taken out loans in the past and paid them off on time. They may even check history, e.g. factors like savings, any prior legal issues or failed business ventures, and even how often you change jobs. So be mindful of black marks against your business and yourself such as: missed payments to utility companies, or falling behind on car loans or credit card payments.

2. Income or capacity to repay a loan

When considering business loan eligibility, the lender is likely to expect evidence of how much money your business makes under recent and normal trading conditions. Be prepared to share your business and personal financial history. This might include bank statements, financial statements, such as a balance sheet and income statement or cash flow statement, sales records and expenditure. 


They may also consider how stable your earnings are and your other debts and living expenses, so have your tax returns and business activity statements (BAS) on hand, too. If your business has been trading for less than a year it’s likely you’ll also need to share cash flow projections and a business plan or lease agreement. 

3. Assets, security, collateral or capital

Providing collateral can help reassure lenders, since having security assets will help lower the loan risk on their part. You could offer a house, land, vehicle or other assets as collateral to support your application. They may also take your share value or equity distribution into account (if applicable). Having capital reserves available, including cash, shares or other assets, can also be useful when trying to improve your business loan eligibility.

4. Affordability and conditions

Loan conditions such as a repayment schedule, interest rates and other terms are key to providing a loan. But external conditions – such as the economic climate – can also be a significant contributing factor. 


There is government-backed financial support for businesses, including temporary repayment relief for financially distressed businesses, cash flow boosts for employers, and even state-and-territory-specific grants and assistance. 

5. Loan purpose or necessity

Why do you want to borrow money? Is it to pay vendors, for staff training, to expand your business, or maybe even to handle litigation costs? Lenders need to know details, the amount you need to borrow, when you’re planning for repayments to start and how much you might be able to pay over which duration.


That’s mostly business loans can be very specific: some may be only suitable for particular purposes, types of businesses and conditions. Other loans specific to business vehicles or equipment may have different terms, as may offerings such as agribusiness loans.


Determining your business loan eligibility is not just down to you. While as the borrower it’s your responsibility to ensure your business can fulfil the loan terms set out for you, your lender should be able to help you find the most suitable loan for your needs. However, keeping these eligibility factors in mind may help put you in a better position to achieve a successful application outcome. 

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Things you should know

This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business.