Dynamic Business

Securing a business loan in the current economic climate has become harder than ever. But what can you do to get the banks on your side?

Most business owners have been frustrated at some point by a bank declining their loan application. The chances of being turned down now are even higher, as banks have begun reducing their business lending and tightening approval criteria in light of the “credit crunch” and expectations of a downturn in the economy.

This means proper preparation for a loan application has never been more important. Remember that your bank manager wants to approve your business, as they have sales targets and dream of a bonus like most salespeople. But they need your help to instil confidence at the bank that your business can and will repay the loan, especially to bank staff who won’t have the opportunity to meet you firsthand.

With the appropriate research, face-to-face presentation and package of information, a loan approval is well within the grasp of many businesses, including some that may have been previously declined.

Before you start
It’s important to seek the right advice on suitable finance facilities for your business, as there’s a growing array of options available. Speak with experienced advisors such as your accountant or finance broker and a range of traditional banks and alternative lenders. These discussions should explore the proposed use for the money, a preferred repayment plan and the security available. This will also help you shortlist suitable financiers for the formal applications.

The pitch
Once potential finance products and lenders are selected, the next step is a series of face-to-face meetings with potential lenders that should be booked at least a few days in advance. Your personal presentation is important, so wear business attire and be punctual for your appointment to illustrate that you’re well organised.
Preparation is the key to a successful meeting and it will also boost your confidence. Be ready to discuss your business, its history, industry, financial information and future plans. Lenders will also be interested in your personal experience, qualifications and management role in the business.

During this meeting it’s important to demonstrate a comprehensive knowledge of your business and industry, whilst being realistic. This gives comfort that your business is a low risk and should be lent money.

Following your earlier research, also share with them your thoughts on how much funding the business needs and how this will be used and repaid, including the additional revenue that the loan will generate. They’ll also be interested to know of any special risks in your business and how they’re mitigated, as well as explanations for any prior loan defaults on borrowings through any lender.

Follow-up phone calls to ask further questions are common and present a great opportunity to reinforce their impression of you as a competent business manager, by giving prompt and accurate answers whilst being polite and professional.

The package
The meetings with potential lenders are important, but the package of written material you provide to them is even more vital, as it will be their principal source for information when assessing your application.