Nearly time to start applying for your first bank business loan?
If so, you’ve probably already realised that there are a million and one different steps to take before you actually meet with a loan adviser. This guide offers some simple tips and advice on what you should be doing before you make that jump and set up your first meeting.
Know what you want from the loan
Simply ‘needing money’ to start your business is not enough when applying for a business loan. You’re asking someone to hand over a substantial amount of money, so they’ll want to know exactly what you’re using it for.
Consider your costs carefully and don’t underestimate what you need. You should be as financially conscious as possible but if you run out of money, going back for a second loan could work out costly, so give yourself enough.
Do you know what type of loan you need? Some popular ones are listed below.
- Working capital loan – For short term cash flow issues
- Hire purchase loan – For expensive, long term business assets
- Fixed asset loan – For purchasing general facilities or equipment
Last but not least, you should think about the type of loan terms you want. Fixed rates, variable rates, loan length, repayment dates – these are all important aspects of getting a business loan, ones that can have a serious effect on your financial situation.
Have this in mind when you go for the meeting and don’t be afraid to challenge the terms if you think they are unfair.
Don’t forget to shop around
Different banks will offer different loans and depending on your needs, one bank’s offer could be considerably more beneficial to your business than another’s. The first mistake to avoid is taking out a business loan with the bank you currently have a personal account with. It might seem easier but ultimately it isn’t and unless they are offering you some type of special deal, then you have no loyalty to them. Make sure you have written confirmation of the type of loan deal you are likely to get with each bank. Not only does this ensure you’ll get this deal should you go back to them, it can also be used as a way to score better deals at your preferred bank.
Research your market
You’ve probably already done this but if not, now is a seriously good time to get started. You should be researching your market and your competitors so you can create a legitimate and compelling business plan. Below are some great questions to consider when carrying out research, as the bank will inevitably want to know the answers to these too.
- Is your market expanding?
- What type of market share are you likely to achieve?
- What will your business growth look like in the future?
- What do your competitors look like?
- How will you rise above market competition?
- What market trends do you expect to see in the future?
- How will these help your business grow?
Solidify your business plan
You’re unlikely to secure a loan unless you can provide a solid business plan. Go over your plan as many times as necessary and understand that there is no such thing as being too cautious when it comes to proofing it. Focus on how your business will succeed but also be realistic and offer options for exit strategies or failures. You should of course check the facts and figures yourself but if you can afford to do so, have an accountant diligently comb through the entire proposal to ensure the numbers add up. The bank will also look more favourably on your business plan if they know it has been checked and given the all clear by a professional. Most importantly, keep you’re your proposal clear, concise and easy to follow. A good business plan shouldn’t be a chore to read.
Get a credit check
Finally, before attending your meeting you should think about getting a thorough credit check. There are plenty of places online that will provide you with a credit score for free and a good score could help you to secure a loan. Even if your business is too ‘new’ to have its own credit score, providing the bank with a personal one should still work in your favour. Anything you can do to give your financial image a boost is important when applying for a business loan, so be sure to plan and prepare to the best of your ability.