If you have a business, or are looking to get into business, you’ve probably thought about getting finance. It might be to buy or expand a business, buy stock, purchase a premise or buy some assets such as a vehicle or machinery. There are, of course, a number of ways to finance your business. Taking the funds from your savings is one but it’s not always the best way. Sure you don’t pay interest when you use your own funds, but what about the opportunity cost such as the effect on your cash flow? Bank loans are still the most common way whether that be a term loan, a line of credit or an overdraft.
So, how to go about it. Do you have a good relationship with your business banker? Do you know who your business banker is or do you even have one? Can you get advice on the best option for you, the best interest rate and fees, the best loan structure that suits your needs? Even if the answer to the above is yes is there another lender out there who could do better?
Even if you are comfortable with all the above, going through a loan approval process mightn’t appeal and you’re probably not alone. Most people don’t enjoy asking a bank for money. You have to prepare all the paperwork, write a formal business plan, provide up to date financial statements and tax records. And after all that effort, you may have to sweat on their decision for ages and it may not be the one you were after.
Fortunately, obtaining business finance can be much simpler and a lot quicker.
Don’t forget the bank wants to approve you
Before you get started, realise that banks actually want your application to succeed. The interest, fees and other services you use is how they make their money. They want to give you the finance but it will help greatly to make their job easy if you turn up with a good business case.
Connect the dots for them. Present a clear story about why you need the money. Help them to fully understand your business. And don’t try to hide anything. Banks and bankers are not expert in your business, that’s you, but they will need to be comfortable that they understand your business and the risks associated with lending you money. You’ll need to demonstrate very clearly how the loan will get paid back.
What you’ll need
When applying for a business loan the banks will generally want to see:
income statements and balance sheets for the past two years
tax returns to verify your income statements
up-to-date financial statements
a business plan including cash flow projections to show the direction your business is taking
Your bank manager will usually need to submit an application to the banks credit approval area. So give them everything they need to make that a straightforward conversation. That means up-to-date financial data and importantly a business plan. It’s not so important how long or involved your business plan is. It is important that it clearly demonstrates what your business is, how it works and how it is going to continue to work in the future. And remember how you operated in the past is important to them but how your business will operate in the future will determine if the banks loan will be paid back.
Getting all this together before you approach the bank might seem like a lot of work, but banks can't make decisions without the right information. Many business loan applications get held up because applicants don't present the right information.
Use a business finance broker
Still daunted at the prospect of approaching the bank directly? Then use a business finance broker.
It makes complete sense to use a business finance broker to help you obtain finance. Someone who has your interest at heart. Someone who has experience in how banks think and work, who understands the terminology and what the banks want to see. Someone who will work with your accountant, solicitor or financial advisor, for you, not the bank.
A good business finance broker will work with you not just for your immediate needs but future business and personal finance needs. They also get paid by the bank, not you directly, and only if the finance is a success.
So call me today for a no obligation chat about how I can help with your finance needs.