Are you a fledgling entrepreneur looking to launch your own business? Or perhaps you’ve already taken the plunge and now wish to expand your operations? Either way, it’s highly likely you’ll need an injection of cash to make that vital next step and loaning from a bank, building society or other money lender is the traditional route.
Whoever you turn to for a business loan is not going to look favourably on an investment that they can’t see a return on, so it’s your job to convince them that you have what it takes to succeed. In particular, here are a few criteria that lenders will be on the lookout for:
- Have you drawn up a comprehensive business plan, complete with a summary of your operations and your projected earnings and outgoings for the next two to three years? Preparation is key.
- Market awareness. Similarly, you’ll want to include a rundown of the size, demographic and growth opportunities of your target market, as well as the state of play regarding your competition. What sets your business apart? Sell yourself.
- Remember to make clear what you need the loan for and how it will affect your business. Whether you want to take on more staff, move to a bigger office location or expand your customer portfolio overseas, it’s imperative to stress the value in this transaction – for both of you.
- Credit rating. All the business acumen in the world won’t win a loan if you have a poor credit history – after all, the shiniest colander leaks just as much water as the shoddiest one. Sort out your finances before you lay out your aspirations before a lender.
- Cash flow. Again, you’ll need to show that you’ve not only managed your debt repayments in the past, but that you’re well equipped to do so again. Accurate data on your revenue and outgoings (both current and projected) is vital to breeding confidence in your business.
- If you already have substantial assets belonging to your business, a bank will be more inclined to look favourably on lending you money than otherwise. This can act as a guarantee that they can recoup their outlay in the worst-case scenario.
Tick all the boxes on this checklist and you stand an excellent chance of being approved for credit from any lender you approach. However, the economic slump of the last decade has meant that more and more people are turning to alternative finance solutions to obtain the funds they need to help their business realise its full potential.
With that in mind, just remember that there are plenty of other options out there if the traditional route doesn’t bear fruit. Asset finance, peer to peer and crowdfunding are all increasingly popular methods of alternative finance that may well be right for you… and the criteria listed above will be just as beneficial on those fronts, as well.