Getting a loan could really help your small business to get through the financial turmoil of the current moment. Unfortunately, every company has had the same idea – and banks are tightening their lending criteria.
If you want to get approved for finance then you need to make sure that you’re putting your best foot forward with an attractive business proposition. Here are a few key tips for getting your house in order before you start approaching lenders:
Understand your credit score
Credit scores don’t just apply to individuals. Businesses have a credit history too, and it’s the first thing any prospective lender is going to want to see. If you’ve defaulted on any payments during the uncertainty of lockdown then it’s important to get an understanding of how it’s affected your score. And even if you think your business finances are squeaky clean, you might be surprised by how fickle a credit score can be.
Use a reputable tool like Experian to find out what your lender will see and ensure that there won’t be any nasty surprises. This is also your opportunity to correct any errors that might appear. Finally, consider your personal credit score too. This is particularly important for fledgling companies, as a lack of financial history for your company will have lenders turning their eyes to your individual finances.
Spend time finessing your business plan
Ultimately, the success of your loan application all hinges on what the bank makes of your business plan. It needs to give a very clear outline of your goals, as well as the steps that you’ll take in order to achieve them.
If there are areas outside your expertise then consult with somebody more experienced to make sure you’re presenting high quality information.
Choose your lender carefully
Different lenders specialise in different types of funding, so do your research and apply to somebody who’s predisposed to accept your proposal. You can use a comparison site to compare lenders offering different types of financing: secured or unsecured, short or long term, fixed or variable rate… there are lots of different options and the one you choose will affect how likely you are to be accepted.
You can also apply to multiple lenders at the same time, in the same way that an eager job-hunter might apply for several vacancies. If you’re accepted by more than one, then you can choose the terms that most appeal to you.
Talk the talk
If your application involves an interview then you need to be ready to prove that you know your business inside and out. You’ll be expected to answer questions about your industry, your financial forecasts (and how you calculated them), your competitors and, of course, your plans for the future. You’ll also be expected to be professional and to understand the banking jargon – so be sure to swat up while picking out your smartest suit.
There’s no simple formula for success in business, but is you’re thoroughly prepared then your odds of success will shoot up. Other than that, be bold, confident and clear about your objectives in order to impress any lender that you speak to.