Step By Step Tips On What A Bank May Want From You If You Want To Borrow Money For Your Business

If you need to borrow money, your bank manager and your professional advisers need to understand how you see your business developing. They can then assess the viability of your plans and forecasts and give you advice and practical help. But, first, what does the bank expect from you?

 

Broadly speaking before meeting your bank manager, you should be asking yourself some key questions:

 

(a)    What type of business do you intend to start – and is it likely to succeed?

(b)    Do you have the personalities needed?

(c)    Will you need money to establish or expand your business?

(d)    Do you need the bank to lend it to you?

(e)    If so, how much?

(f)      And when?

(g)    How will you pay it back?

(h)    Do you have any security you could offer the bank?

 

Your bank manager will expect you to know the answers to these questions on the outset.

 

Your bank manager will base the decision on whether or not to lend money to your business on his/her assessment of your business plan. Ultimately, the decision has to be a financial one. But if you present your plan on the back of an envelope it may indicate that you have a non business like attitude, which is unlikely to impress your potential customers.

 

Therefore, try to prepare your business plan in a clear, professional way. Consider typing it, or having it typed, and do not overcrowd the page. Ensure that your headings are clear and that all the figures used add up correctly. Clarity and simplicity are the key words. If your business plan is confusing, it is unlikely to convince your bank manager.

 

Your manager will also want to assess your personal qualities and your reliability, your capacity to stay in business and fulfill the promise of your business plan.

You need to think carefully about these important questions, as your ability to answer them will determine the manager’s response to your approach.

 

Other considerations

 

Once you have made your business plan, checking every aspect of your business and deciding whether or not you need help with the finance, you need to consider some other areas, two of which are insurance and taxation.

 

It is important that you understand the implications of both of these from the beginning, as failure to do so could result in serious repercussions for your business later on.

 

Insurance

 

It is very important that you take adequate insurance to protect your business’ future. This should include protection against:

 

(a)    The cost of replacing stock and equipment that is lost, stolen or damaged.

(b)    To cover your premises against fire, floods etc.

(c)    Damages for injury to an employee, customer or third party whilst on your premises.

(d)    Any special risks that apply to your type of business.

(e)    Loss of life. (What happens to your family in the event of your death)?

 

Without the right type of insurance the survival of your business could be threatened.

 

Taxation

 

It is very important to you to make sure that you pay no more tax than you are obliged to pay, although you are of course obliged to provide accurate tax returns. Poor record keeping and lack of the right advice can lead to pay excess tax.

 

An unexpected tax bill can kill a small business, so you must be able to anticipate your tax liabilities.

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