It’s no surprise that Australian small businesses face a challenging financial landscape. And while we’ve seen an encouraging uplift in settlement rates to 18% for all opportunities generated in 2024 (compared to 16.1% in 2023), we’ve also observed a slight decline in qualified applications, suggesting businesses are becoming more selective about when and how they approach financing.
This shift reflects a market where lenders are applying more stringent criteria, making it increasingly important for businesses to position themselves as “financeable” before applying. With careful preparation and the right expertise, businesses can significantly improve their approval odds and secure better rates.
Having facilitated over $2.5 billion in loans to more than 20,000 SMEs over the past 10 years, here are five practical ways to make your business more financeable and improve your chances of approval and secure better rates:
1. Establish a strong trading history
One of the most significant shifts in the market has been lenders requiring longer trading histories before approving finance.
Whereas some lenders were previously happy to fund businesses after just six months of trading, now those same lenders may require at least two years. This means it’s really important to start building your formal business identity as early as possible.
The way to do this is to establish an ABN and register for GST at the earliest opportunity, even if your revenue is minimal initially. This creates a documented trading history that lenders can verify.
Then by six months, by 12 months, even though it’s been a bit of a grind, you’ll find that you can start to get access to equipment finance, so you can get a work vehicle, you can get tools of the trade. These sorts of things start to pick up that pace for a business owner looking to get an enterprise off the ground.
2. Manage your ATO obligations
Many business owners don’t realise that tax debt can severely impact their ability to secure finance.
Banks hate SMEs with ATO debt. It’s one of the first red flags lenders look for, and it can immediately disqualify an otherwise viable business from consideration.
Therefore you should prioritise ATO payments, even if it means negotiating payment plans for other creditors. If you do have tax debt, consider addressing this before applying for new finance, or at minimum, have a formal payment arrangement in place.
3. Separate business and personal finances
Maintaining clear separation between business and personal finances not only helps with tax compliance, but also significantly improves your financiability.
Keep church and state separate. It can be tempting to use a personal account as an overdraft for your business, but this creates a messy financial picture that makes lenders nervous.
Instead, establish dedicated business banking accounts, avoid using personal cards for business expenses, and ensure you’re paying yourself a consistent salary rather than making irregular withdrawals from the business.
4. Consider property as a strategic asset
While the lending market is evolving, property ownership still plays a significant role in accessing better financing terms.
In today’s market, there are really competitive, mature, non-bank lenders that in the asset space are often beating the banks on price. That includes some lenders offering finance without the borrower requiring personal property to secure the loan.
However, the reality is, people who own property will typically get better access to credit. The exact same customer, with and without property, will often get a slightly cheaper rate from most of the bank and non-bank market.
If you do own property, consider how it might be strategically leveraged to access better rates. If you don’t, focus on building strong business financials and explore lenders specialising in unsecured options like lines of credit that don’t require property collateral.
5. Maintain clean bank statements
Your bank statements tell a story about how you manage your business, and lenders are reading that story carefully.
No ATM withdrawals at the TAB, no gambling transactions! This is a huge flag. These kinds of transactions on business accounts raise immediate concerns about financial management and risk.
Review your last six months of bank statements through a lender’s eyes. Look for regular, positive cash flow, consistent revenue patterns, and an absence of dishonours, overdraws, or concerning spending habits.
While these tips can improve your “financability”, there’s no doubt it’s hard right now to be honest.
This is where working with a business finance specialist can make a difference. With access to 80+ lenders, Valiant Finance helps businesses navigate the complex lending landscape, matching them with the right financing solutions, working with them over time as their financeability changes.
But no matter whether you’re looking to grow, manage cash flow, or refinance existing debt, understanding what makes your business financeable is the first step toward securing the funding you need on the best possible terms.
