To be successful in obtaining a small business loan, you must be
able to meet the lending criteria set down. Some organisations
are more risk averse than others and will, therefore, have more
stringent criteria.
To vastly increase your chances of a successful funding
application, you will need to present the following nine pieces of
information:
1. The reason for the loan. The lender will be looking for
something that fits within the normal range and expertise of
your business. The amount may cover a number of items, so you
will need to cover each.
2. The amount required, and the repayment term of the small
business loan you want. (e.g., $10,000 term 5 years, payable
quarterly).
3. Details of how you will repay the amount borrowed. For
example, “From the increase in profits of reduced running costs
of the Whizzbang Go4It”
4. Details of security you will be able to offer to the lender.
This will act as reassurance for the lender. If you’re not
prepared to put up some aspect of security, then why should
they?
5. You will need to include your business plan which will serve
to answer essential questions relating to management
capabilities, information about the market you operate in. What
kind of business you are in etc.
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6. 3 Years financial statements. You will need to
present quality financial information from your accounting
software, preferably signed off by your accountant or tax
advisor.
7. Latest Set of Management accounts. Again produced from your
accounting software.
8. Accounts receivables (debtors) and payables (creditors)
ageing reports.
9. Principal's financial statements – Particularly required if
some form of security is necessary.
If you are a new company, the emphasis is going to be on your
business plan, and the security (also called collateral) you or
your business can provide against the loan.
You must take the time to practice presenting your case to the
bank or lender to iron out any glitches. Practice on your
colleagues and family (you never know, they might be so
impressed they'll invest or lend!). It may help to role play
the lender and come up with as many pointy questions as
possible. The more time you take the better your chances will
be. (But remember, don’t fall into the analysis paralysis trap!)
Good luck in obtaining your small business loan!
Now read about:
A Painless Business Plan
About the author:
Neil Best is an accountant with over 15 years experience in
business finance. This article and other useful business finance
information such as making effective business plans and sourcing
and applying for business grants can be found at
http://www.smallbusinessfinancetips.com/small-business-loans.html
