Making the next big step for your business is an exciting time, but securing funding can prove to be difficult and frustrating. There are myriad requirements for a successful application and navigating the process is often daunting. We’ve prepared this advice to make sure your application gets off to a strong start. The key is to be well prepared and have plenty of detailed documentation and evidence to support your application.
Provide relevant and accurate information
Your application will need to be supported by accurate documentation that clearly illustrates your need for a loan and your ability to pay it back. Clearly indicate how much you’re asking for and what you will spend the money on. Giving accurate information on how the money will be spent assures lenders that you know what you are doing and that you have honest intentions for it.
Many lenders will require two years of accounts and bank statements to show that your business is active and responsibly managed. Additionally, you should be prepared to provide a business plan and additional details of your profits and losses like your balance sheet. This information will show the overall health of your business and prove that you have a clear plan to responsibly use the money from the loan, and the ability to pay it back on time.
Show evidence of cash flow
Another important part of preparation is assessing and presenting the cashflow of your business. Ingoing and outgoing cash, how quickly invoices are paid, and your overall expenses are all relevant information that a lender might want to see. The key is to paint a picture of sustainable cashflow and activity. This will assure a lender that you can pay back the loan and that this is a healthy business with potential for continued growth.
Be willing to put up collateral
Collateral is what you pledge as security against your loan in the event that you cannot pay it back. Take stock of your business and find out what you can put up as collateral. If you own the premises or land your business is located on, that will make for ideal collateral. Alternatively, you may consider machinery or plant owned by your business, or even personal assets. A car or home, provided you own it, can be considered collateral by a lender. However, this would mean putting them at risk if you are unable to repay the loan.
Improve your credit score
Your credit score is one of the first things a lender will look at to determine if you can be trusted with a loan. It is a quick indicator if an individual can be trusted to repay a loan. You can improve your credit score by taking out small amounts of debt and making timely payments on it. A common way to achieve this is by using a credit card for purchases, and then paying off the amount at the end of the month. Building good credit can take time but will absolutely be worth it in the long term.
Check your eligibility for government grants
There are a broad range of government grants for businesses. Make sure that you check thoroughly to see if you are eligible for any of these first, as it may be easier to qualify for than a business loan. If you then go onto pursue a business loan, having responsibly used grant money or paid back a government loan on time will act as evidence in your favour that you can be trusted with a loan.
If you’re looking to secure a loan for your business, why not talk it over with the experts? The team at Omer & Company are a team of friendly and approachable accountants here to talk through your business’ financial needs and help you take that next big step. Give us a call on 020 8850 0700 or send an email to info@omeraccountants.co.uk for professional accounting advice for your business.
