05 September 2022

As a business owner, approaching banks for finance assistance such as a loan or an overdraft facility is not uncommon, but ensuring you have the repayment ability is not only a priority for the bank but also for your own financial stability moving forward.

Many businesses will have borrowed money, a loan is a good option if you;

• Will use the money to grow or cover a shortfall, rather than a bail out option

• Can make repayments on time, every time

• Can potentially pay it off earlier (sometimes this is not ideal with early repayment fees)

• Understand the loans terms and obligations

Once the decision to apply for finance is made it is not as simple as walking into the bank and asking. It’s important for you that you understand the application requirements, and you’re prepared with your own research on what type of loan is appropriate, what your financial position is, and what your growth plan is. Banks want to see that a business is viable and importantly that it can pay back the borrowed funds and interest.

When you apply for a loan have, at minimum;

• Your current financial data and financial statements

• A cashflow forecast (12 to 24 months dependant on requirements)

• A business plan – if you are undertaking a new business venture and have no financial data to supply lending options may be limited.

• Details of what security options are available e.g., property details, valuation etc

You will also want to establish a good relationship with your bank, for example regular contact with the branch manager or a specialist advisor may be useful.

Having a detailed, big picture for your business, i.e., where it is, where you want it to go and how you will get there is vital, this details a clear sense of direction and shows that as a business owner you are serious about the application and comprehend the undertaking.

Lastly, think about the structure of the finance. This can look like retaining flexibility with a floating interest rate, having certainty and protection against fluctuation with a fixed-rate loan, or even a split of both. This also includes whether the loan is best structured as a short term or long-term loan, and whether there is the option for lump sum repayments.

There are many benefits to taking on debt for the benefit of your growing business but it’s important to think carefully about the financial impact and ensure your business can continue to not only survive but thrive. Being well prepared will make the application process simpler and more efficient.

For advice or assistance on getting finance for your business contact our expert advisors here