Getting a business loan is not as easy as it once was. During the ‘boom’ times you could get a business loan based on a few pages of information. Not today. If you are approaching your bank for finance you have to be prepared for a long list of demands.
We all know the 5 P’s when it comes to preparing for a big event – ‘preparation prevents particularly poor performance’ – and when it comes to approaching your bank for a business loan, this has never been truer.
To help them in assessing whether you are a good risk banks are coming up with an ever growing shopping list of required information.
To help you stay one step ahead of the game in getting a business loan here’s a list of what you can do in advance of putting your request in.
Prepare a Business Plan
Whilst you may think a face-to-face interview will be enough for the bank to understand you and your business, it’s not the case. You can’t take the risk of the bank not ‘getting’ your business. Writing a Business Plan takes away that risk; you’re in control of the message you want to get across.
A Plan does not have to be complicated. Here is a simple four-part outline:
• Where your business has come from and your background
• Where your business is today
• Where you want it to be
• How you are going to get there
Before you approach your bank with your business loan application, commit time and resources to writing a Business Plan; it may be less painful than you think and it will certainly give you a head start.
Bring Your Financials Up to Date
Your annual Financial Statements may not mean much to you but for the bank your numbers are the foundation of their assessment process.
If you have been lax in keeping your financials up to date speak to your accountant today. Your bank is not going to move an inch until it has a set of Accounts on the desk.
Prepare Your Latest Trading Figures
So you have your Financial Statements produced within three months of your year-end and the bank is happy? No! A few months is a long time in business and the bank will want up to date trading details in the form of Management Accounts. These are a mini version of your annual figures but more up to date – ideally to the end of the previous month.
In the current climate you should be preparing regular performance figures to assist in tracking areas for improvement as a matter of course. If you’re not, start today so when it comes to speaking to the bank you’re fully prepared.
Get Your Financial Projections Ready
Whilst the Business Plan sets out your vision in words the financial projections set out your future in numbers.
You will need a minimum of two years projections to include a forecast Profit and Loss, Balance Sheet and Cash Flow.
There are three reasons for the bank requiring projections:
• To be convinced that your business can service the level of debt you are requesting
• To monitor actual results achieved against the numbers projected with any deviation, acting as a warning sign
• To force you to think through your project in terms of numbers in order to take away the emotional element
Don’t shy away from this important task; you need to demonstrate to the bank that you are comfortable with the numbers aspect of your business.
Prepare a Personal Financial Summary
Banks will take greater interest in your personal financial position. In these tough times savings have been depleted, and credit cards maxed out to keep the cash flowing. The bank will want to know how your personal financial position looks.
Start by preparing an Income and Expenditure Report which lists your monthly household ingoing’s and outgoings. This is then backed up by an Asset and Liabilities Statement which summarises your assets – house, car, and savings – and your liabilities – mortgage, car loan, personal loan, and credit card.
But That May Not Be It …
This list is not exhaustive. Each business loan request and business is unique so the information asked of you will be tailored accordingly. Banks continue to be mindful of the risks they are taking on and one way to mitigate this is to obtain as much information as possible.
If you prepare your business loan application well in advance you can save a lot of time and stress so start your preparation now.
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Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.