How to guarantee success on your business loan application

If you are the owner of a small business, or are in the process of setting up a small business, then chances are you will at some point need finance for your business. In the past this was a simple process as banks and other financial institutions were very keen to help businesses out. In the current economic malaise however, things are just a bit trickier. 

Although the government is putting pressure on banks to lend money to small businesses, because they are considered to be the ‘drivers’ of the economy, some of them are still not lending as freely as they should be. That’s not to say there aren’t loans out there, just that you will need to work a bit harder. 

Whether you take advantage of loans from the government or from a financial institution you should be able to find something. Indeed there are loans for every type of applicant, from loans geared to women, to loans for people with bad credit to loans for veterans. Spending some time looking online is a good way to track down loans specific to your criteria.

Once you have a broad idea of where to look you will then need to consider the factors the loan companies will use when assessing your application. These range from your credit history (or the credit history of the business) to your experience in business (and education) and the business plan you have put together:

Perfecting your business plan – This is the most important part of your application so you need to make sure it is word perfect and that all the numbers add up. In your business plan you need to set out your short, medium and long term aims for the business as well as providing realistic projections of turnover and income for the next three years. You should include a worst case scenario to show you have weighed up all the risks and you should outline how much money you will be needing to borrow, where it will be spent and how you will be repaying it.

Picking the right lender – Once the business plan is written you need to select the lender you want to borrow from. There are a number of government loans and grants around at the moment (normally with excellent interest rates) so look through these first to see if you might qualify. Alternatively, compare the business loans on offer from the banks and find one that looks like it will fit your needs. Most importantly, shop around for the lowest interest rates and fees.

Picking the right loan – Next you need to make certain you get the correct loan for your needs. There are all kinds of different loans available to small businesses, from secured loans to expenditure loans to joint venture loans. Make sure you understand how each of them works and what they would mean for your business. If in any doubt, speak to a small business advisor.

Consult the small business administration – If you are looking for small business advice on any step of the loan process, get in touch with the Small Business Administration and they will offer you free and impartial advice.

Esther is a freelance blogger and writer who covers everything to do with starting a business and becoming an entrepreneur. She blogs about everything from business plans to setting up websites, staff costs to accounts receivable financing.