New guidance for businesses on securing bank finance has been released by two leading membership organisations from the business and banking sectors.
The Federation of Small Businesses (FSB) and the British Bankers’ Association (BBA) have joined forces as part of Small Business Advice Week.
Their top tips for giving your business’s loan application the best chance of approval are:
- Develop a robust business plan
- This should include projections for growth and should be periodically updated as growth is achieved or market and financial factors change.
- Build financial understanding
- You must be able to demonstrate that you understand your key numbers – e.g. turnover, profits and existing debts – as well as being able to show how the debt will be repaid.
- Check your track record
- Banks will look at the credit history of you and your business in order to see how you’ve managed previous borrowing. Check your history and address any concerns.
- Be honest
- Be clear about how much money you need and why you need it. Underestimating what you need or overestimating your projections may affect the lender’s confidence in your ability to repay.
- Keep talking
If you get a ‘no’, ask the lender for feedback. They should be able to give you advice about the changes needed to make a ‘yes’ more likely in the future.
An independent appeals process for businesses whose loan applications are refused has been agreed by the main high street banks. The FSB and the BBA urged more businesses to consider the appeals process.
John Allan, national chairman of the FSB, said:
“The bank will base their decision on the information supplied to them, so making sure that it is robust is vital. We know that banks turn an application down because they don’t think the business will be able to repay it or because the business hasn’t properly demonstrated how they can repay it. These tips should give small firms the best possible chance to get finance so they can grow and help sustain the economic recovery.”
The BBA’s Irene Graham said:
“If you run a business with a good business plan and want funding, our message is go and talk to your bank. There should be no doubt that now is a good time for businesses to go and see their bank if they want to borrow.”