Top ten tips for securing finance

Raising finance from a bank is never a foregone conclusion, but you can give yourself a better chance of success in securing your business loan by following our top ten tips.

1. Write a business plan

Even if you are not intending to borrow money, planning should be a core part of running your business. If you are borrowing money then it is even more important. A business plan is more than just a cash flow forecast, it is your opportunity to show that you understand the market you operate in and how your business fits into that market.

2. Commit your own money

Banks are less likely to agree to lend you money if they are being asked to take all of the risk. Demonstrate that you are putting your own money into the proposal as well. If you don't have any cash yourself consider whether it would be appropriate to raise some money from friends and family to achieve this.

3. Reduce the risk to the bank

Banks like to know how they will get their money back if things go wrong. You need to explain to the bank how it will get its money back if you don't achieve what you aimed to do in your business plan. Typically this may be by providing some security in the form of a mortgage over a property or a guarantee from a wealthy individual.

4. Build a relationship
The better your bank understands how your business operates and what you hope to achieve, the more likely they are to support you. Even if you do not need finance immediately, take the time to keep your bank up-to-date with progress in your business. You may even find they will approach you to ask if you need to borrow money.

5. Shop around
As with most things it pays to shop around. Putting your proposal across the desk of more than one bank is a sensible approach. If your request is border line you may find that different banks will take a different view on your proposal.

6. Get a recommendation
Ask among your friends and associates to see if they have had particularly good dealings with a bank manager.

7. Take it seriously
You will tend to get out of this what you put into it. Present your request in person; pitch your business and give them confidence in you as an individual. Demonstrate your complete understanding of the business you are entering into.

8. Build on your strengths

Banks are more likely to lend to you if you are building on an existing business or skill you already have. A skilled plumber setting up a plumbing business is a far more attractive proposition than someone with no catering experience opening a restaurant.

9. Be flexible

Consider all the options open to you. You may ask for a business loan, but the bank may offer you a combination of an overdraft, asset-based finance and credit cards. Stay flexible and see if you can make any alternative proposals work for you.

10. Plan ahead

Even if you have a strong proposal, raising money can take much longer than you expect. Make sure you have given yourself enough time to raise the finance you need. This will reduce the pressure on you and give you the opportunity to sell the proposal to the best of your ability.

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