Before you apply for business finance it’s important to have all the information at hand that the bank will need. The more prepared you are, the better your chances of success.
So, before you go to the bank, get as much detail together that you can.
Sounds obvious, but you will need to spell out what the money will specifically be used for in your business. It allows the bank to be confident the funds are being spent wisely.
Typical loan requirements include:
Regardless of the reason, you’ll improve your chances of getting a loan if it’s clear why you need it and what the ideal outcome will be (more capacity, new markets, operate faster, expand sales).
It’s common sense to borrow as little as possible. Outline how much you’re contributing yourself – such as cash reserves from the business and any personal savings. If you have equity in a home, explain why you’re not using this form of (often cheaper) finance.
Also cover other alternatives such as assistance from family or any investors.
If possible discuss any ‘bootstrapping’ tactics you’ve tried to raise cash like selling old equipment, clearing old inventory at discount prices, borrowing rather than buying, seeing if customers will pay in advance, and joint ventures with other firms.
If you can provide the bank with information at the start of the application process that helps them make a decision, they’ll be reassured you’ve thought carefully about the loan.
It’s a great idea to show that whatever amount you borrow you can pay it back, ideally from the extra profit the business will make from the capital you’ve borrowed. No bank wants you to default on a loan.
It’s best if you provide:
Be prepared to provide security, such as real estate or business assets. You may be asked to include a registered valuation for any property security. For a commercial property, a copy of the lease is handy.
In addition to your business plan, you’ll also want to:
Show your industry and self-employed experience, if applicable. Ultimately, it’s you that pays the loan back, not the business. Include:
It’s important to show that your business can generate enough cash to meet your monthly obligations (with your new loan added in) and still provide an income to you. Your financials should include:
Be prepared to describe why you think your sales are achievable, any market research you’ve done, how you’ll achieve your projected profit margins and any key expense items. Make sure you allow for the extra costs in achieving higher sales results.
Every bank manager wants to approve your loan application and support your business. They want to work with you and keep you as a happy customer for years. Help them to say ‘yes’ by coming prepared with supporting documentation, information and explanations about your business and your personal financial situation. You’ll increase your chances of getting a loan approved and make the application process much easier – and perhaps faster.