6 questions to ask before getting a small business loan

From new premises to new technology, small businesses are presented with opportunities all the time, and each has to be considered on its merits. If you’ve done your research and believe the idea’s got legs, but need finance to fund it, a small business loan could be the answer.

But first, here are six questions to ask yourself before taking on finance.

What’s the small business loan for?

While your business is something you’re likely emotionally invested in, it’s vital to remain objective about any opportunity that emerges. It is business after all. So before deciding whether a small business loan is a good option, be crystal clear on what you’re intending on using the money for and what positive impact it will have on your business.

How much finance do you need?

If your financial projections suggest your business will benefit from a cash injection, then the next step is to work out how much you’ll need. Remember to factor in any costs associated with what you’re using the loan for. For example, if you intend to buy a new vehicle or a new piece of equipment, it’s going to need insurance.

What’s your current position?

It’s one thing to know how much is in the bank today – it’s another to have an accurate picture of what’s coming up. Make sure your cash flow forecast is on point, all knowns are accounted for, and you are confident you can make the regular repayments, even in quiet periods.

How’s your credit history?

If you’re thinking about applying for a small business loan, it’s a good idea to check your credit report, so you can correct any mistakes, as this will impact your loan application. There are three credit reporting companies in New Zealand: Centrix, illion and Equifax. The New Zealand Government provides a handy guide on the best way to check your credit report.

Is there other funding that could help?

Is a small business loan definitely the right option? For example, if you’re a Kiwi business looking at a loan for R&D, you could be eligible for business growth funding through Callaghan Innovation – New Zealand’s innovation agency. Worth a look!

Make it easy to get a ‘yes’

At Prospa, it’s our mission to keep small business moving, providing small business loans of $5,000 to $150,000. To apply, all you need is identification (i.e. a valid Driver’s Licence) and some information about your business (including your trading time, ownership details and an active New Zealand Business Number). Note: to qualify for a Prospa Small Business Loan, you need to have been trading for at least six months, with a minimum monthly turnover of $6,000.

It takes 10 minutes to fill in the online form and we can often provide a response within one hour, as long as you’ve applied during standard business hours and allow us to use the advanced bank verification system link to instantly verify your bank information online.

So, the clearer the information you provide to us about your business, the easier it is for us to say ‘yes’.