Tips for a successful finance application
The UK’s five largest high street banks offer their insight to help you ensure your application for credit stands the greatest chance for success.
80% of unsuccessful loan applications are not approved because the business either can’t show how it will repay the loan, or already has a poor track record in making their repayments.
To maximise your chance of success, your business plans and projections must be comprehensive and realistic. They should clearly demonstrate that you understand your market, your income and your costs. And if your business has a troubled history, such as bankruptcies or County Court Judgments, you also need to be open about what went wrong and the measures you have in place to improve your record.
How to improve your chances of success
1. Develop a strong business plan
Demonstrate a clear grasp of your financials, emphasising your ability to meet repayments. Show that you have thoroughly researched your market and your competitors. And identify clear routes to market, highlighting when you expect money to start coming in.
2. Build a good financial understanding
Make it clear that you understand your numbers, outlining what you need the money for and how you will pay it back. Research what goes into a sound balance sheet and cash-flow projection, work with an accountant or a business mentor.
3. Check your track record
When making its decision, a bank will take into consideration the way your business has managed its finances in the past. If you believe your credit rating is incorrect or inaccurate, you can challenge it.
Find out more about your credit rating and the key elements that might affect it through by contact a credit reference agency
4. Be honest
Do not underestimate how much money you need: coming back to the bank for more funding will be more expensive. It may also affect confidence in your ability to manage your company finances. Avoid overestimating revenues and undervaluing the costs you will incur – and remember to include the living costs you will need to take out of the business.
5. Stay in dialogue
Try to stay in close contact with your bank. Ask for feedback on your lending applications and how you could improve them. The bank may sometimes ask for more information to help reach a decision. Remember, a ‘no’ now may not mean a ‘no’ in the future. And keep checking what other banks offer to small businesses: your bank may be willing to improve its offer if you have other quotes.
A good understanding of the options available is an essential starting point and enables businesses to select the type of finance that is right for their circumstances and plans.