Applying for business loans
While it can be easy to consider business loans as hard to get, or a last resort, with careful planning before you go to see your bank manager or lender these can be a good way of getting the capital needed to get going.
Preparing the facts
Before you get to the point of making your appointment with potential lenders it's important to make sure you’re in the right position and at the right stage in your business’ development to bring in investment. It’s also important to factor in the time it may take to get funds through from a lender – the average lead time is between three and six months.
Before you approach lenders you’ll also need to make sure your business plan is up to date, accurate and features all of the relevant information, projections and financial planning that investors are likely to want to see. Remember, if you feel you need help with your business plan there are business advisors who can assist.
Most importantly you need to know:
How much money do you need? This could be the full amount needed to get started or, if you already have some investors, just a proportion of it.
Over what length of time would you prefer to repay your loan? This will determine the rate and cost of your interest.
Are there any assets against which you can secure the debt? Again, this will determine the rates you’re offered.
You’ll need to make sure you know all your facts and figures before meeting your potential lenders. The more money you’re asking to borrow, the more in depth your information needs to be and you’ll certainly need to give details on all the activities of your new business, the people you’re working with and the skills and experience they bring with them.
The potential lenders will possibly ask you about the research you’ve carried out, so you need to make sure that this has been done properly and thoroughly and that you can discuss it in depth.
It’s also prudent to have monthly cash flow projections for the year ahead to show that you’ll be able to meet interest payments.
All of this information should be demonstrated in your business plan, having several copies to hand will enable you to share this easily with your audience, while also having one to refer to yourself.
You should also take up to date business and personal financial history, including references, credit scores and accounts.
Registering your business – loans and finance
Before you investigate your finance options you’ll need to have all your business plans in place. This can include coming up with business ideas, choosing a name for your business, writing a business plan and registering your business with Companies House. All showing the bank that you mean business when applying for a business loan.
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