pprovAt some point, you will need to apply for financial assistance, whether you are starting a new venture or expanding your business. However, as many know, obtaining a loan approval is not a walk in the park. You will need the assistance of a Melbourne accountant or chartered accountants Melbourne to help you with your financial papers.
In the previous article, we have tackled some of numbers that matter when applying for a loan. This article is the continuation.
Will You Pay?
Aside from assessing your ability to pay, the banks will also need to determine if you will stick to your promise to pay. Your credit background is a good indicator on how you will most likely handle your future loan, if you are granted one. With this in mind, the banks will look into your personal and business credit score, which play a very big role in determining the answer to this question. You can discuss this further with your Melbourne accountant.
If the bank finds out that you are heavily financed with other people’s money, then you are deemed to be a high risk. They will also look into your debt to worth ratio. This is determined by dividing your shareholder’s equity in your balance sheet by total liabilities.
This means, if for example you have $50, 000 of equity, you should not have more than $ 150, 000 to $ 200,000 in debt. Your Melbourne accountant should be able to provide you guidance on how to determine this.
What If You Don’t Pay?
Another consideration that banks look into is the possibility that you will not pay your loan. If the worst happens, the lender needs to know if you if you have any liquidated assets to pay off your debt. However, you need to keep in mind that the collateral used should have high saleability to increase your chances of getting a loan approval.