When applying for personal finance—whether it’s for covering a temporary cash flow gap, upgrading home equipment, or supporting a growing business—understanding what lenders look for can significantly improve your chances of approval. While requirements may vary between financial institutions, there are key factors every lender evaluates before offering you a loan.
For small business owners in Australia, knowing what lenders assess can help you position your application strategically. This guide walks you through the most important considerations lenders make, so you can better prepare and maximise your borrowing potential.
Table of Contents
- Credit History and Credit Score
- Income and Employment Stability
- Existing Debts and Liabilities
- Loan Purpose and Requested Amount
- Frequently Asked Questions
- Conclusion and Next Steps
Credit History and Credit Score
Your credit history is one of the most influential factors in a personal finance application. Lenders use this to gauge how reliably you’ve handled credit in the past.
Why It Matters
Lenders want to minimise risk, and your credit score helps paint a picture of your financial behaviour. A good score indicates that you’ve consistently paid bills on time and haven’t overextended yourself.
What Lenders Look For
- A credit score of 600 or higher (in most cases)
- No recent defaults, bankruptcies or court judgments
- A long and stable history of credit usage
- Evidence of responsible repayment habits
Tip: Regularly check your credit report and address any errors before applying for finance.
Income and Employment Stability
Your ability to repay the loan depends heavily on your income, and lenders will look at both the amount and stability of your earnings.
Key Documents Lenders May Request
- Recent payslips or tax returns
- Bank statements from the past 3–6 months
- ABN details if self-employed
- Profit and loss statements (especially for small business loans)
For self-employed Australians, lenders may be more flexible but will still need to see consistent income—whether through sole trader earnings, contractor work, or revenue from a small business.
Existing Debts and Liabilities
Even if you earn a decent income, existing debts and liabilities can affect your borrowing capacity. Lenders evaluate your debt-to-income (DTI) ratio to see how much of your earnings already go towards repaying loans.
Things That May Affect Your Application
- Existing personal loans or credit cards
- Business finance commitments
- Ongoing lease agreements (e.g., vehicle or equipment finance)
- Outstanding ATO debts
If your DTI ratio is high, consider paying down smaller debts before applying to strengthen your position.
Loan Purpose and Requested Amount
Clearly articulating why you need the loan and how much you need helps lenders assess risk and suitability. Vague or uncertain purposes can raise red flags.
Best Practices When Detailing Your Loan Purpose
- Be specific: e.g., “Upgrading dental clinic equipment” or “Covering seasonal cash flow dip”
- Request an amount that aligns with your financial situation
- If applicable, explain how the loan will help increase revenue or reduce costs
This is particularly important for small business loans in Australia, where lenders may want to see how the loan will benefit the sustainability or growth of your business.
Frequently Asked Questions
Can I get personal finance with a low credit score?
Yes, though your options may be limited. Some lenders specialise in helping borrowers with low credit scores but may charge higher interest rates.
Do I need to provide security?
Not always. Many personal finance options are unsecured, meaning you don’t need to offer assets as collateral. However, for larger loans, lenders may prefer or require some form of security.
How can a finance broker help?
Working with an equipment or business finance broker like Capital Plus Finance can improve your chances of approval. Brokers have access to multiple lenders and can match you with the best option based on your profile.
Conclusion and Next Steps
Applying for personal finance doesn’t have to be overwhelming—especially when you understand what lenders are looking for. By improving your credit score, stabilising your income, reducing debt, and presenting a clear loan purpose, you can significantly improve your chances of getting approved.
If you’re considering a personal or business finance solution, let Capital Plus Finance help. With access to over 40 lenders across Australia, our expert team can connect you with the right loan for your needs—whether it’s for cash flow support, equipment upgrades, or business expansion.
👉 Talk to Capital Plus Finance today and discover how we can support your finance journey.
