Getting a loan anywhere, including London, can be a considerable help for your business. It can help you to scale up your operations, or ease financial burdens if your business is struggling. However, not everybody that applies for a business loan is successful. This means that procuring a loan from a bank or any financial institution is not easy as you may think. However, it is not impossible. If you approach things in the right way, your chances of getting the loan will increase significantly. Your preparedness, dedication, prudence, and honesty are what count.
Below are some essential tips to keep in mind if you’re applying for a business loan.
- Create a Feasible Plan
Presenting a well thought out plan will be very useful in procuring a loan. Besides other financial and business documents, a comprehensive and feasible business plan will make your lender happy. The plan should include a summary of your business profile, information on the project you intend to embark on, the required loan amount, marketing strategies, and revenue generation strategies.
In other words, this plan is a condensed form of all other documents and information you submit. The plan will lay out what you intend to do with the money you borrow and how you plan to pay it back. A good business plan will create a positive impression on the lender and make things easier for you as they will know you are serious about what you want to do.
- Be Clear About Your Requirements
It is essential to have a proper idea of why you need a loan before applying for one. People look for loans for various reasons. Some want fresh capital to start a new business, while others look for funds to expand their growing business. Others may be poised to renovate their premises and improve their infrastructure by purchasing more computers, card payment machines, and other state-of-the-art business equipment.
Additionally, you might need money for inventory or other essential operations. There are many types of loans suitable for different situations. When you are clear about your requirements, you can go for the right type of loan or approach a consultant who can guide you how to do this.
- Have Your Documents Ready and In Order
Even if your business is running well, you might lose out on the loan you want if you cannot demonstrate this adequately. Presenting proper documents is essential to give the lender a clear idea of the present condition as well as the history of your business. It is better to prepare your documents well in advance rather than rummaging for them among your files midway through the process. Be sure to have your bank statements, finance, tax, and accounting documents, audit reports, balance sheets, and any related documents in order so that there is no difficulty in presenting your financial status properly to the financial institution.
- Maintain a Good Credit Score
Banks want to make sure that you are creditworthy before giving you a loan. Therefore, it is crucial to have a history of borrowing funds and repaying them on time. If you are seeking a role for a new business, your personal credit history will be scrutinized, as you won’t have and business history to show.
It is also better not to apply for too many loans at the same time, because each time a lender checks your credit history, your score comes down a little. Therefore, it is advisable to approach fewer lenders and choose those who you think you have the best chance of getting a loan.
- Prove Adequate Cash Flow
Banks and lending organisations will analyse whether you can pay back the loan in time. Cash flow is a necessity if you want to honour your repayment obligations. If your business generates adequate and reliable revenue, you will be able to pay back the borrowed amount before their due date without much hassle. If you cannot show enough cash flow for your business, your request could be rejected or they may charge you a higher rate of interest to get the loan.
Business loans are a boon to any business as they can help you to prosper and grow, or to get over difficult times. However, as managing to get a loan requires you to overcome several obstacles, you should plan and prepare well in advance.
Even if you follow the best advice and are well-prepared, there is no guarantee that you will be successful in your endeavour. If you fail to get a bank loan despite doing everything you could, don’t feel let down. You can look for alternative finance options, such as crowdfunding, borrowing from friends or relatives, personal finance, or government loans or grants, and prove your worth by conducting your business successfully.