Whether your business venture is just getting off the ground, you are currently facing financial difficulty or require additional support to expand your enterprise; a business loan offers the ideal solution. While seeking additional funding is nothing out of the ordinary, sometimes loan approval is not easy.
According to The Bank of England, in late 2014 lending by all UK resident banks and building societies indicated a unstable flow and on average, lending was broadly close to zero. It is clear that although the heavily strained days of the financial recession may be behind us, small businesses are still considered a lending risk.
Although discerning, the above does not necessarily indicate that business lending has become a complete “no go zone”. However there are no doubt a number of business owners considering what options they have left – particularly if rejected once already.
Rejection is never easy but don’t be surprised and don’t be disheartened if you have been told that it’s a no. With strict lending guidelines, loan rejection may be down to a number of issues, some of which can be easily improved…
Lenders will initially want to determine whether the loan is necessary which is why it is important to know the exact figure you wish to borrow.
A ballpark figure will not suffice and over borrowing will simply lead to rejection; be sure that you can explain exactly how much you require and for what purpose.
Transparency is key, whether you consider your financial statements to show your business in the best light or not, it is crucial that everything is out in the open.
Detailed financial statements will highlight earnings and allow lenders to determine whether your business is profitable with the capability to pay back the loan.
Obtaining a business loan goes beyond walking into a bank and filling out a form. A lot of businesses often fail because they haven’t taken the time to understand the application process.
Not all banks are the same so make sure to research what lenders will want to see. This may include something similar to a business plan where you will be expected to highlight how much and for what you require a loan. Understand the process to avoid missing out anything vital.
Before applying for a business loan, are you sure you are as prepared as possible for the lengthy process that lies ahead? Whether a large or small sum, when requesting lending from a bank or building society your business will be examined very carefully, is everything out in the open and ready? Are you prepared to answer every question that you may face?
If a previous loan request has been rejected, take a look at the above points; is there anything that you could have improved on?