Author - Robin Bowman, Senior Business
Editor
It doesn't matter whether you're a start up or an established
company, approaching your bank for a loan can be the crucial moment
in the life of your business. And for thousands of small businesses
it can amount to a make or break event.
Unless you've been living in a cave for the last few years,
you'll know that getting money out of banks is about as tough as it
has ever been.
It's also important to keep in mind that borrowing money to fund
your business is very different from getting a personal loan. 
But first, remember that banks are in the same sector as you are
- they want to do business; and granting loans and collecting
interest is a large part of what retail banks are all about.
Having said that, banks have tough criteria to apply to
businesses who want loans.
That's why it's vital to make your approach as carefully
prepared as possible. Preparation is the key to success.
Here's a checklist of what a small business should keep in mind
when trying for that all-important loan.
Know which direction your company's heading
in
You need to demonstrate the direction in which your business is
developing. In other words, you need a solid business plan and you
need to explain clearly how the loan you are asking for will be
deployed. Where does it fit in with your plans for growth?
Be ready to be very specific about how much money you need and
why.
You'll need to account for exactly what you plan to use the
money for - and in detail.
Probably the most important aspect of all this is to demonstrate
that the loan will create a significant return. The better you can
show this, the more chance you will have of being successful in
getting the credit you're after.
Let figures make your case for you - costs and profit
projections, for example.
Also show that you have assessed the market thoroughly and are
not just plunging in on a hope and a prayer!
Anticipate the kind of probing questions you would ask a
business presenting the same case for a loan as you are. Then work
out how to deal with those questions. And don't go easy on yourself
in your preparation - think Dragon's Den and give your pitch a hard
time.
The more you anticipate and prepare, the better your
chances.
Be ready to put your own neck on the
line
This really means offering some security, which, for many small
businesses starting out, can be a house, or some life savings. This
shows the bank that you take risk seriously and will be committed
to making the business work - so they have more chance of having
any loan they advance repaid.
Putting up personal assets is clearly a highly stressful thing
to do, but, if you have little or no track record and your business
is relatively new, this might be required, especially in the
current financial climate.
Show the bank they'll get their money (and
interest) back
The more you can show you have considered loan repayment, the
more chance the bank will look upon your application
favourably.
The best way of doing this is to let your accounts do the
talking, perhaps with your accountant's help. You should
demonstrate you have managed the business efficiently in the past
and that cashflow has been adequate.
The bank also wants to be convinced that you are competent in
your business sector, if possible that you have previous experience
and that you have planned carefully and realistically, eliminating
as much risk as possible (making sure you have good and adequate
insurance is a definite bonus!).
Most of all the bank will want to see that you have done your
homework and that your projections of how the business can grow are
realistic, not just wishful thinking.
Remember - appearances do
count!
You'll make an impression whether you like it or not - not only
by how you look and present yourself, but in what you say and
do.
Think professionalism. Dress like a business person; act and
sound like one. Be organised and punctual for appointments and make
sure any written submissions look the part, are clear and concise,
avoid waffle and are properly spelt.
Prepare - and then prepare some
more!
It's worth running through what you intend to say to make your
case, word for word, until you are fluent and completely confident.
Regard the process as a pitch for business and sell yourself, but
do it calmly without unrealistic or exaggerated claims.
If you spend enough time thinking about your business and the
case you're going to make to the bank, you will arrive at pretty
much all the questions you are likely to be asked. That is, you
will do so as long as you're honest with yourself and try to
examine your case as though you are the lender. If you do all
this, you'll be ready for even the trickiest questioner.
Be very determined
Of course, these days it's a fact that many businesses will fail
when they make a loan application - or they might be offered terms
that just don't add up. The tightening of access to finance for
businesses is one of the most serious consequences of the credit
crunch.
But no one succeeds in business by allowing themself to be
defeated easily. If the bank turns you down, refine your pitch and
then try other lenders; and try and look at what grants and help
for small businesses are available in your region. Above all,
don't give up!
Robin has been a journalist for more than 20 years,
during which time he has held several senior media management
positions in both Fleet Street and Hong Kong. Robin recently
returned to the UK after being based in Italy for six years. He has
a passion for business innovation.
The content of this article reflects the views of
the author and may not necessarily reflect the views of Premierline
Direct.
