Want to improve the chances of having your business loan approved? In this article Astute Ability Finance Group's Managing Director, Mhairi MacLeod outlines considerations business owners should address when developing a business plan to accompany their loan application.
Preparing a detailed business plan helps to inform a lender about your business and where you are headed. With a better understanding of your business lenders can assess your application as favourably as possible.
1. Know your numbers
To inspire confidence in you as a borrower, it’s important you are familiar with your key financial figures, even if you don’t prepare your own financial statements. This includes current income, net profit and expenditure.
Include a profit and loss budget, and, if your business is new or you are starting a new business, prepare your personal credit history.
2. Estimate how much funding you need
Are you looking for funds to help with cash flow and operations on a regular basis, with a larger overdraft limit for occasional use? Or do you need one-off funds to open a new branch or purchase additional equipment?
Prepare an updated business plan to establish all of the factors in your application, including any partners and strategies.
3. Project your cash flow
You can use this to prepare pro-forma statements, or projections of what your business will make going forward, making adjustments based on past trends.
4. Provide proof of loan security
A lender will evaluate your risk factors to determine if you and your business are a good investment. Consider the maximum payment you can afford before meeting with your finance broker, who can advise you on whether you should offer collateral or a third party willing to guarantee the loan on your behalf.
5. Ask questions
Your finance broker will shop around on your behalf to find out what products are on offer. If you’re already a customer with one lender, discounts may be available. If one option is much cheaper, your finance broker will be able to tell you if it carries higher fees or a likelihood of the interest rate changing.
Need finance for your business? Astute Ability Finance Group, Managing Director, Mhairi Macleod can be contacted on 0414 436 837 or she can be reached by email.