Apply For A Loan and Check Your Credit Rating
Banks offer reasonable rates for business loans, particularly when compared with other loan providers. However, banks are often cautious when lending money, especially to new businesses with no real assets. If you want to maximise your chances of the bank accepting your business loan proposal, there are a few steps you need to follow.
Check Your Credit Rating
Banks will usually check your credit rating before agreeing to a loan, as they want to ensure that you will make the repayments every month. If you can demonstrate a good credit score, you are far more likely to be accepted for a loan. If you are starting a new business and currently have no credit rating, you can use your personal credit score to show that you can manage your finances. Websites like Experian allow you to view your credit score to find out what the bank will see when they check your credit history.
Create a Detailed Business Plan
A comprehensive business plan is essential if you want to secure financing for your business. The bank will want to see a clear plan of how you intend to build your business and make a profit. You will need to provide financial forecasts and show that you have researched the market, the competition and your potential customer base. Your business plan should be realistic and achievable, using conservative estimations for your financial forecasts.
Identify Your Needs
The bank will want to know exactly why you need a business loan. The more detail you can provide about the items you need to buy or the expenses you need to pay, the easier it will be for the bank to make a decision. If you need to buy expensive tools or machinery, the bank may want to see quotes or estimated costs for specific items.
Research the Bank
Many banks provide guidance on their website for people wanting to apply for a business loan. The bank may have their own rules for applications or they may require you to provide specific paperwork and legal documents, so it is important to read the guidelines thoroughly. Some banks also have their own forums where you can ask questions and seek advice from other users. Learn as much as possible about the bank before applying for your loan, as this will help you to tailor your application.
Practice Your Pitch
Once you are ready to meet with the bank manager, you will need to plan your pitch. Consider how you are going to present your application to the bank manager, making a note of any important points you want to make. Practice your pitch until you feel confident that you can get your message across. Ask a friend to listen to your pitch and provide advice on where you could make improvements.
Banks reject business loan applications for many reasons. The bank could feel that your business plan is unrealistic or that you will be unable to make your loan repayments. If your application is rejected, you may need to make a few changes to your business plan before applying to a different bank.