A business loan is a crucial part of the funding structure for any growing business. It enables owners to invest in their business and improve the services they offer by innovating and expanding in an ever-competitive business landscape.
However, applying for a business loan may be a new or unfamiliar experience for many entrepreneurs. It’s not something we’re taught at school and knowing where to start can feel daunting. But, at Close Finance, we work with businesses regularly to ensure they can assemble all the right information and documentation to support their loan application and increase the chances of it being approved.
If you’re a business owner considering taking out a loan, here are few things you need to know.
Have a solid business plan
The key to a successful loan application is having all the evidence you require to show us, as your lender, that your business plan is comprehensive and that you’ve got a good grip on the short, medium, and long-term goals.
This not only includes your financial figures, but recruitment and retention plans, potential threats and weaknesses and how you will overcome them, how you’ll use external resources (like marketing) to support business growth and acquire new customers, and an audit of your competitors alongside your unique selling points that make you stand out from the crowd.
The devil is in the detail. The more you can share with your lender about your business, the greater understanding they’ll have about whether your business is strong enough to lend to. This is especially key if you work in sectors that are usually deemed high-risk by lenders, such as emerging technology.
Looking for someone to help you perfect your business plan? No matter what stage you’re at in your business journey, the team at Jersey Business provides free, independent, confidential advice and support.
Make sure you’ve got a good lending track record
Many first-time entrepreneurs won’t have any business records of borrowing money (or perhaps more importantly, of paying it back), so lenders may instead look at their personal lending records to assess if their personal credit history is sound.
Before you apply for a business loan, ensure that your financial records are up to date as these can work favourably for you. For example, if there are things you could do to improve your credit score, such as adding yourself to the electoral register or opening a credit card account and using it wisely, get those done before you apply.
If you’re struggling with poor personal credit, then now’s the time to discuss your options with a lender. This could include seeking support from a guarantor, or discussing what assets you own to secure your business loan against, rather than seeking an unsecured loan which carries a greater level of risk for the lender.
Explore your options
Shopping around for a lender is key. When one lender says no, another may support you in finding a way to structure your loan that works for both you and them.
At Close Finance, as a lender that supports customers in the Channel Islands, we pride ourselves on our versatile offering that puts your needs first. We’ll always work our hardest to find the best solution for you and your business. Responsibly, we’re here to make your vision come to life.