Below are a few tips I have picked up from working with various lenders over the years, and where I have seen businesses let themselves down.
1. Keep up to date accounts
Don’t sell your business short!
Time and time again I receive applications from businesses presenting me with accounts that are 12 months or more out of date. By giving up to date accounts, you’ll give the lender a clear picture of where the business is — as opposed to where it was. I have seen too many deals declined or given a lower offer because of old accounts.
Invest some time in putting together monthly or quarterly accounts, because it could be the difference between a yes and a no.
2. Check yourself before you wreck yourself
Ice Cube probably wasn’t talking about credit history when he came up with that line, but don’t fall into the trap of thinking a business loan is all about the business — alternative lenders are keen to understand the men and women behind the business too.
You wouldn’t believe how many directors have approached me for funding without any clue what their personal credit file is like. There are many websites these days where you can check your personal credit score, and trust me, it’s well worth doing.
3. Be honest
Following straight on from tip number 2, if you do have something in your credit file that could be a concern for a lender — just tell them. I work with well over 50 lenders, so in most cases we have a lender for each scenario.
Often, the lender will respond better if they’re made aware of the situation, whereas if they find out themselves they might be concerned you’re trying to hide something.
4. Show affordability
Profit is one thing, but what a lot of people forget is to show it in your bank statements. Many businesses have an overdraft and use it, which is fine — but if you’re on the brink of it or exceeding it, not so much.
The lender wants to ensure their repayments won’t put the business into distress each month, and by showing cash flow headroom you put the lender at ease.
5. Come with a reason
If you read my last article, you’ll already know this one.
Yes, you need money to ‘grow the business’. But what will you actually spend the cash on? If it’s for a late HMRC bill, tell me, because I work with lenders who will look at this. Or maybe the loan is for marketing? New staff? Materials for a new contract?
Whatever the reason, more often than not I will have a lender who can help. What the lender is keen to understand is how this loan will help the business — and the more specific you can be, the better.
Now, I’m not saying that if you follow these tips you will be guaranteed to be approved for funding — but you will certainly give yourself a better chance. You might be offered £25,000 when previously you would have been declined, or you might even get the full offer and term you were after — rather than turning a ‘yes’ into a ‘no’ by not following these tips.
Get in touch with Mike Stanley on 0161 694 7116 or firstname.lastname@example.org