Better Business Finance

How to get a yes - Top tips for lending application success

Any bank will base its decision on the information supplied by the business.  The top reason why loan applications are not approved is because the bank is concerned that a business may not generate enough money to be able to afford the loan repayments.  Of the loan applications that are unsuccessful, over 80% are because businesses haven’t been able to demonstrate how they can repay the loan or have a poor track record in paying back its lending. 

So that your application has the greatest chance to succeed, it is vital that your business plans and projections are comprehensive and realistic, showing you know your market and understand your costs.  It is also important that if you are a business with a troubled history, such as adverse data (bankruptcies, CCJs), you are transparent with what went wrong and have put in place measures to ensure your record is now clean.

Top Tips for lending application success:

• Develop a robust business plan - Business plans are more important than ever and you should demonstrate your business’s financials, showing the all-important repayment ability factor.  A business plan should give a business owner/director confidence in their decisions, way before it is used to give confidence to a lender.  Business plans are all about testing and measuring, helping make informed decisions that are based on fact and sense.  In your plan you should demonstrate that you have done your homework, by researching your market and competitors.  Identify clear routes to market and highlight in your plan when you expect to start bringing money in.


• Build your financial understanding – To be successful you must understand your numbers.  To have a successful credit application you must be able to clearly demonstrate your understanding and show how the business will manage/maintain the credit it is asking for.  You should also be able to clearly outline what you need the money for and how you will pay it back. Read-up or work with a business mentor to ensure you know what makes a sound balance sheet and cash flow projection.  A range of resources are available on the Better Business Finance website or you can look to work with a mentor through the new Mentorsme portal. 


• Check your track record – When making a lending decision, banks will take into consideration how you have managed your finances in the past.  It is therefore important that you know your credit rating and understand the key elements that might affect it.  This can be done through Experian (www.experian.co.uk).  If you believe your credit rating is incorrect or inaccurate you should challenge it. 


• Be honest – Do not underestimate how much money you will need. If you need to return to the bank and request further funds, it will be more expensive. It may also affect the lender’s confidence in your ability to manage your company finances. Do not over-forecast revenues or under-value the costs you will incur.  Be honest about any reasonable living costs you will need to take out of the business.


• Keep the dialogue open – It is important to communicate often and clearly with your bank and to seek feedback on your lending applications.  A ‘no’ now may not mean a ‘no’ in the future.  Ask your bank how you could adjust your business model to help secure funding and what elements of your plans may need further consideration.  Be sure to check around and compare different banks and their small business offerings. Your bank may be willing to improve its offer if you have other quotes.

Download the factsheet in PDF format: - here.