If you’ve ever needed to secure more capital for your business, you’ve probably considered applying for a bank loan to subsidise the development of your company. While this in theory sounds like a relatively easy way to get more money for your business, the reality is that it’s not always that straightforward.
There are several factors and criteria that get taken into account before a business loan is approved by a bank, and sometimes a company that is ill-prepared will be rejected. If you’re considering applying for a business loan and want to make sure you’re on the best footing for this, in this post you’ll can find out what a lender does when deciding whether or not to approve your application. In turn you can then utilise this information to improve your chances of success when you apply at one of the UK’s business loan providers.
Your Credit Score
One of the first things they will check is your credit score. The obvious factor here is that the better your credit score, the more favourable it is for you as it shows you have the ability to make the repayments. No credit score or a poor credit score can severely limit your chances of getting a loan.
Your Income and Potential Earnings
In order to pay back the loan you’ll need to make your current financial state as clear as possible and also discuss what your expected earnings will be and what your predicted financial future is for your business. This is then taken into consideration by the bank to help them decide if it is a worthwhile investment.
Along with your earnings you will also have to explain what your assets are – such as any business properties, your facilities or company vehicles. Some lenders will seize these should you fail to make repayments once your loan is approved.
As well as your credit history, the lender may speak to you about your financial history in general, or the success of your past business ventures. Personal information like this again work in your favour if it is positive, or be a minus point against your application.
How you Intend to Use the Money
According to a recent statistical release from the BBA, as much £6 billion has been leant to UK SMEs per quarter of year, continuing the trend from 2015. So clearly the nation’s respective banks and lenders have a lot of faith in up and coming businesses – this is of course providing you’re looking to use the money in a way that will benefit your company in the future.
In other words, you will need to make it clear to the lender what your business plans are, as this is another factor they take into account with their decision making. If these seem half-baked or not very well thought-out, this can be detrimental to your success rate.
So before you apply for a business loan, take note of the above factors and hopefully you should get the loan you need for your company.