Borrowing money from a bank to fund your business can be a daunting and challenging task, and a lot harder than applying for vehicle finance or personal loans. Banks are strict when it comes to qualifying criteria, which could deter companies from approaching major financial institutions. What’s more, rules have become even more stringent due to the credit crunch, and everybody is feeling the pinch. If you are a small business owner considering approaching a bank for a financial institution for loans for LTD companies such as one from https://www.merchantmoney.co.uk/small-business-loans/ltd-company-loans/, there are factors to bear in mind for a successful application.
Demonstrate what you are going to use the loan for
You need to have a clear vision and direction for your business and tell the bank how you plan to use the finances they are providing. If you have a solid business and budget plan, banks will likely see you as a good candidate for a business loan. Show how every cent will be spent and what your expected gains will be. Banks won’t be too impressed if you plan on paying salaries or adding unnecessary improvements to your business. You have to give them a realistic outline on your expenses and your plans to solve any shortfall.
Prove that your business can repay the loan
Lenders need assurance that you can repay the loan in the required time frame. They will need to, therefore, see details on your cash flow, profits and expected revenue. To improve your chance of loan approval, you must show that your business is growing. Another selling point is your experience in the industry and your management team. Lenders like companies that are adding value to the market and providing employment and training to numerous demographics. It gives them confidence that they are investing in the right people.
Don’t be a risky investment
Lending money is one of the most lucrative ways lenders make their money, but also one of the riskiest. What’s more, there are added costs involved in trying to get cash from individuals who default on their payments. The less of a risk you are financially, the better your chances of getting loan approval. There are generally two things you can do to set the bank’s mind at ease. Firstly, you can put up some security in the form of assets that you will lose should you default on your payments. Some banks will insist on types of assets, the most common being a property or home. The second option is by putting in equity, which is a gesture of good faith to the bank.
The main tip to applying for a bank loan is to first shop around. Don’t just go with the first name that comes to mind or the bank that you already use. Look around for banks that are promoting their lending options or have special offers running. There is also the option of approaching alternative lending solutions, which may be able to offer better terms and more lenient application criteria.