You may find a business loan is necessary to fund your business, perhaps because you need equipment, stock, or premises; business loans usually span between 1 and 15 years and the interest rate offered is often based upon the banks assessment of your ability to repay the loan.
A way to improve your chances of obtaining a business loan is to show your lender that you will be able to consistently maintain your repayments, ideally offering them accounts to prove your earning history.
When assessing you as a credit risk your lender will look at your personal credit history as well as your business dealings, this will be especially important if you are a sole trader or a partnership, and it may help your chances to provide a business plan showing a realistic prediction of future earnings.
One of the reasons for companies failing in their application for a business loan is a poorly written business plan; plans that make assumptions without suitable research, or badly written or presented plans that can create a negative impression of your capability as a business owner.
Make your business plan short and to the point, clear and easy to understand, and ensure that it includes information such as competitor research and your marketing strategy.
If you find yourself in the position of being offered a business loan, you will need to decide whether to take a variable or fixed interest rate; a variable rate floats and can be influenced by the fluctuations of the Bank Base Rate, and a fixed rate is a rate that is agreed out the outset and will apply for the entire term of the loan.
Applying for a Business Loan
No matter how good you think your business plan is, without finance to back it your business will not get far. By following some of these simple guidelines you may increase your chances of getting your loan approved and your business off the ground.
What do you need to know about it?
There are many different types of business loan that you can apply for, from diverse organisations that deal with different types of business. Before you apply for a loan, try to find out which organisation it is best to send your application to. To request a no obligation quote for a loan now, just click here.
Some of the reasons that businesses fail in their applications are:
- Bad work at the planning stage
Business plans that make assumptions (or huge leaps of logic) without the research to back it up - poorly thought out financial plans would fall into this category - Badly written and presented business plan
If your business plan is poorly presented it may not even get past the initial phase of consideration
Competition
You are probably not the only person who has thought of this business idea. If it is not a new idea but one that is filling a lack in your area or sector, do you have any competitors? It always pays to know the competition.
Drawing up the business plan yourself
Not knowing what is in the business plan or being unable to answer questions on it will not help your cause. Professional advisers will be able to draw up a plan for you, but you still need to be able to present and explain it. Although you need to be able to answer questions on it, it should be self-explanatory where possible.
What do you need to do about it?
Make your application snappy! A long and windy business plan with your thoughts on every aspect of the business is likely to bore the reader.
For the plan to succeed it should be:
Interesting
Short
Clear
Easy to understand
If you must use anything other than laymen's terms, make sure you explain the terms you use.
Lastly, these are just some of the areas that the lender will be paying close attention to. It will increase your chances of success if you bear these in mind when you are writing your business plan:
- You
The lender will want to have confidence in not just the business plan, but also the other things that make a business work. The organisation, the management, the workforce and the product or service will all be of interest. - Time
Allow enough time for approval to come through. It is best not to state in the timescale that you are relying on the lender to come through for you to keep to the timescale. There is no guarantee as to how long a decision will take. You can start the ball rolling now - click here to request a quote for loans today. - Finances
If your idea is unlikely to make any money you will not get the loan. This sounds like a simple concept and it is. Make sure that you back up all the statements you have made with profit and loss projections and cash flow charts, and show the reasoning behind your projections. - Failsafe
It may serve you well to show that you have considered the worst-case scenario and what security you are using to back up your business plan if it fails. - Marketing
This is also something that lenders will be interested in. What is your marketing strategy? This should be included in your plan.
This is a guide. It may be helpful for you to also talk to a professional in finance provision.
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