How to ask for a small business loan
Handy tips to help you secure a loan for your small business.
For most new and small businesses, asking for a loan is a key step in getting set up.
Unsurprisingly, it can be daunting. Your plans for the future of the business could be jeopardised if your investor or bank manager says no, and since the recession banks are typically more cautious with their cash.
However, while this process can be challenging it is far from impossible. If you have a strong business and a good plan there is no reason you should be turned down. Here are a few tips on making sure you get a yes.
1. A water-tight business plan
The importance of your business plan cannot be overstated. Natwest claim that "a concise business plan is the strongest tool you have for securing funding" and this is very true. Even if your company is running at a healthy profit, the bank will be unwilling to invest unless you can provide a solid case for how you will use their funding to become even more successful.
2. Know your figures
When meeting your bank manager, it's crucial to know your figures inside out. Your business plan should contain details of capital, cash-flow patterns and cash balance as well as turnover, profit and loss forecasts for at least the next three years.
Don't be afraid to go into detail and break things down even further into seasonal or even monthly forecasts. This will make it clear your plan is well thought out and no stone has been left unturned in putting it together. Make sure you know your figures off by heart and aren't just relying on them being down on paper.
3. Sell yourself
One thing many business owners may forget when applying for a loan is that the bank is investing in you as a person as much as your business. If a small company is to be successful it has to be well-run from the top, and even an excellent concept will fail without strong leadership.
While you need to impress the bank with your business plan, you also need to convince them that you have the ability to make it a reality. Ensure all of your relevant skills, experiences and achievements are included in your plan and don't be afraid to blow your own trumpet.
You also want to demonstrate that you have the necessary drive and ambition to be successful. Fortunately, this shouldn't be too hard, as most business owners are passionate about their company and this will come across while speaking to your bank manager.
4. Be prepared
Ensuring you are fully prepared may be a very obvious piece of advice, but it's crucial nonetheless. Forgetting an important detail or failing to provide a vital document looks unprofessional and could seriously hinder your chances of securing funding.
When meeting your bank manager, make sure you have all of the necessary paperwork, such as information on your assets, accounts from any other businesses you own, your employment record, references from previous employers and customers – and, of course, your business plan.