How to make the bank say ‘yes’


The Federation of Small Businesses (FSB) and the British Bankers’ Association have identified five steps you can take to ensure your business loan application has the greatest chance for success.

1. Develop a robust business plan – Your business plan is crucial to demonstrate the businesses financials, showing that you can repay a loan.Your plan should demonstrate you have done your homework, researched your market and competitors as well as identified clear routes to market and highlighted when you expect to start to bring in money.

2. Build financial understanding – To be successful you must understand your numbers. This means clearly demonstrating you understand key numbers such as turnover, profits and existing debts, and show how your business will manage the credit it is asking for. Clearly outline what you need the money for and how you will pay it back. Research or work with a business mentor to ensure you know what makes a sound balance sheet and cash flow projection. A range of resources are available on the new Better Business Finance website www.betterbusinessfinance.co.uk. You can look to work with mentor through the new Mentorsme portal – www.mentorsme.co.uk

3. Check your track record – When making a lending decision, banks will take into consideration how you have managed your finances in the past so it is important you know your credit rating and understand the elements that might affect it. This can be done through companies such as Experian www.experian.co.uk. If you believe your credit rating is incorrect or inaccurate you should challenge it through your bank or the credit agency used.

4. Be honest – Do not underestimate how much money you will need. If you need to return to the bank and request further funds, it will be more expensive. It may also affect the lender’s confidence in your ability to manage your company finances. Do not over-forecast revenues or under-value the costs you will incur.

5. Keep the dialogue open – It is important to communicate often and clearly with your bank and to seek feedback on your lending applications. A ‘no’ now may not mean a ‘no’ in the future. Ask your bank how you could adjust your business model to help secure funding and what elements of your plans may need further consideration. Be sure to look around and compare different banks and their small business offerings. Your bank may be willing to improve its offer if you have other quotes.

They also offer advice on appealing a ‘no’ decision

You have the right to appeal the decision if you are declined lending following a formal application for a business loan. This appeals process is overseen by an independent reviewer Professor Russel Griggs, OBE, himself a businessman. You can start your appeal at www.betterbusinessfinance.co.uk/appeals-for-borrowing.

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