Since the 2008 banking crisis, securing a bank loan for your small business has become notoriously difficult in the UK. Even with Government schemes, banks are reluctant to offer funding. That is unless you can convince lenders you have a solid business strategy.
The days of the credit culture, where even your pet dog could get a loan, have come to an end, but it is not impossible if you are well prepared and can present a compelling case. This article details the documents you need to prepare your strategy and the manner in which you should approach banks in order to increase your chances of securing a loan.
Check your credit rating
You can’t get a bank loan for anything if you have a bad credit score, so to save yourself time and effort, the first thing you should do is check your credit rating. This is easy to do. In the UK there are three companies, Equifax, Experian and Creditcall, all of whom charge £2.
Prepare a pitch
Now you are satisfied you have a good credit score, devise a pitch that will sell your business to a potential lender. A bank needs to be satisfied that you have a commercial idea that is marketable and that you have the skills, ideas and contacts to make it a success. Deliver your pitch with passion and commitment. You need to generate confidence in the lender otherwise they will not trust that your business will be able to pay the money back.
Write a business plan
When approaching a bank for funding, a solid business plan is critical. It must detail your strategy and clearly outline what your business aims are and how you plan to achieve your goals. For more details about what to include in your business plan read this article.
Figures speak louder than words to a bank and your financial statements are the most important documents in your application. You should prepare a five year plan, the expected ROI in the loan and your profit forecast. Back your proposed figures up with hard facts and statistics that support your projections.
Banks invite borrowers to book an appointment online or by phone, but you make a better impression if you go to the bank in person, even to make an appointment for the meeting. This also avoids spelling and grammar errors in your application. Your appearance should be smart and presentable.
Banks have a standard set of questions they will ask so do some research and make a list of questions they will probably want to know. You will make a far greater impression if you can answer confidently and without hesitation. With this in mind, also practice your pitch and practice it some more until you can reel it off verbatim from any point. You need to be able to talk fluently about your business plans and pluck figures off the top of your head.
Finally be realistic about how much the bank will lend you and how much you need to borrow. Do not under or over evaluate your project because if the figures don’t work out, you will lose the confidence of the lender and your loan application will be rejected. Go into the meeting with an air-tight strategy supported by figures and you increase your chances.
If you need advice or assistance putting a business proposal together speak to a professional accountant. Gordon Ferguson specialise in helping small businesses secure bank loans so give us a call today and we will be glad to help.