Even the greatest of business ideas need some financial backing behind them in order to kick start operations. Whilst for some it takes the smallest of funding to get things running (read all about The Cambridge Satchel Company’s budget of £600!), others will require significantly more to see the business succeed.
A small business loan is a safe way of securing the finances you need to see your dream business flourish, however, a trusty lender will expect certain things from you before deciding to offer you the financial backing for your business.
As such, it’s wise to consider the following factors on how to get a start up business loan, to ensure that you are a great candidate for business finance when the time comes for you to speak to a potential lender.
Narrow your down your list of lenders
Not every lender will be suitable for your needs, so take the time to do some research and narrow down the list of loan providers you are interested in speaking to. You’ll need to consider how long you want to borrow money for, as well as how much you are hoping to borrow, the interest rates associated with your loan and any additional extras you might want when taking out the loan.
By having an understanding of what you want from your business loan, you’ll be able to cut out the time spent talking to lenders who might not be able to give you what you need.
Create a business loan proposal
Take the time to create a comprehensive business loan proposal before meeting with any potential lenders. Your proposal should be a document that offers concise information regarding you and the business you are hoping to start. It should also highlight the amount of money you are looking to borrow, what you intend to do with the money and how you’ll pay it back over time.
Prepare a structured business plan
A solid business plan will also help in your favour, by assuring the lender that you understand where the business could go as well as the challenges you might face along the way. It provides evidence that you have done your research and have faith in the business’ future success, which will put some faith and trust into the lender themselves. See our past blog post on creating a business plan for your startup business.
Organise your cash flow
Having a good cash flow system will put faith into lenders and increase your chances of securing a business loan for your business. Organise your records for as far back as possible, as some lenders may ask for a more extensive history of cash flow than others.
These records will provide evidence that you can manage money well and are capable of paying the money back in the right timeframe. If the business is starting from scratch and currently has no finance history, you may be asked to provide records of your own personal finance, so that lenders can see how you behave with money.
Prepare details on any collateral you have
In case the lender has concerns that you could struggle to pay the loan back, it’s wise to take details of any collateral you have. These are considered assets that could be used for security of repayment and as a last resort for the unlikely case of your falling behind. Think about property, stock or equipment you have to hand, to name a few.
Discuss the key members of the business
Offer up information about those who are involved with the start up business, including any key skills, qualification or experience they already have. The lender will appreciate that you are providing detailed information about those involved and will be assured that they are leaving their money in good hands.
Meeting the lender face to face will give them the opportunity to suss you out and to make their own assumptions on whether or not you are a trustworthy candidate for lending their money to. As such, you should take the time beforehand to prepare yourself with how you are going to introduce yourself, your business and why you want to take out a business loan.
Go that extra mile, by bringing any references from those who have done business with you in the past, to give an unbiased overview of you as a business professional. It could be something as simple as this, that determines whether or not you secure a business loan.
It’s important that any money you secure for your business is kept separately from your personal finances. Take a look at icount’s business account with prepaid card, offering a low-cost alternative to high street business bank accounts that comes with plenty of additional perks.