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There’s a Fraction Too Much Friction (in the borrowing process)

Too much friction in the lending process

Okay, that might be an understatement, especially if you're trying to get funding from a big bank (and get it quickly!). Accessing funding from banks is a slow and arduous process and sometimes accessing funding from non-bank lenders can also be a bit painful.

From Moula’s perspective, there are a few simple things that you and your business can do to maximise the speed at which you can access funding. Every lender will require the same sort of stuff – so why not get on the front foot and have your business affairs in order for when you need to source that funding.

1. Reconcile Your Bank Accounts

Simple stuff, and not just for when you want to access a loan, but critical in running your business day-to-day. If there is a gulf in difference between your balance sheet bank balance and your bank statement bank balance, how do you know if your business is in good shape and if you are pursuing the right strategy, clients or products? 

Effective management reporting requires timely bank statement reconciliations. Up-to-date business accounts are a key tool in managing businesses effectively.  Simple monthly disciplines such as keeping your bank account reconciled is good for your business… and makes our job as funders much easier when we assess your business for a small business loan.

2. Keep Your Tax Affairs Current

Don’t stick your head in the ATO sandpit (many SMEs do!) – you are running a business and if that business is to be viable then all liabilities should be recorded, including liabilities to the tax office. Not submitting tax returns and BAS’s is not good practice – get an accountant or a tax agent on board if you need the extra help.

As a result of their failure to submit, we see so many businesses racking up substantial interest and penalties for failure to lodge tax returns. It also sends a sign to potential lenders that business discipline might not be strong, thus impacting on the lending decisions (higher interest rates; higher likelihood of rejection). Get your shop in order, get those overdue tax returns in and understand your business’s obligations to the tax office. Moula recognises businesses that show good tax discipline and factors this into underwriting.

3. Understand Your Tax Portal and Know How to Access It

As an extension to point two, you should know how and where to access your ATO portal information – if you have a tax accountant, ask them. The portal is the equivalent of your business’s bank statement with the ATO. You can see your debits (the amount you owe the tax office) and credits (the amounts you have paid the tax office or any rebates received). The balance shows the amount that you owe the tax office or the tax office owes you.

Remember, if you haven’t submitted tax returns or BAS returns the balance won’t be an accurate indicator of tax office payables (or receivables). Knowing where this information is can take some pain out of an online borrowing process.

4. Trust Information

If you conduct business through a trust, every lender will need to run compliance checks which will involve a certified copy of the trust deed. Certifications don’t go stale, so why not get your trust deed certified the next time you meet your accountant or lawyer? It is a five-minute exercise and will likely save you a more painful process when you are applying for a loan for your trust business. And remember, if you’ve amended your trust deed, get this certified as well.

Moula is here to provide Australian SMEs fast and painless access to funding at reasonable and transparent rates. Learn more about unsecured small business loans from Moula.

Author:

Before becoming co-founder and COO of Moula, Andrew spent over 16 years with a number of financial institutions in London, spanning risk management, credit modeling and structuring. Now that he’s back home, Andrew is focused on solving the capital problem faced by small businesses in Australia. He has a Bachelor of Commerce from the University of Melbourne and is a Chartered Accountant of Australia.

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