ExecutiveChronicles | A Simple Guide on Applying For Business Finance | Financing your business can be beneficial for growth or improvement, and with a range of options to choose from, you can find the loan most suitable for your needs. Applying for finance can seem daunting but being prepared and knowing what to look out for will allow for a smooth application period and give you the best chance of being approved. Read on for a simple guide on how to apply for business finance.
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Make a business plan
One of the first things to do when you’re applying for business finance is to make a business plan. Lenders, whether that’s banks or independent financial institutions, will want to know more about your business. When putting together your plan, you should outline how your business began, and how it has grown since. You should go into detail to explain where it is now and where you are predicting it to end up in the future. You should be sure to include strategies that may be of interest like sales and marketing, as well as cash flow, a background into your finances, as well as any financial forecasting for the future.
This is an important step as it gives banks and lenders an insight into your business and helps them to form the decision on whether they think lending to you is a safe option, and if you’re likely to meet the repayments.
Be realistic
When applying for a loan, you can save yourself time and disappointment by choosing a loan that you’re likely to be approved for. For example, if you have a bad credit history, choosing a bank loan may not be the best for you, as your application may be rejected. If this is the case, you should opt for a finance option that is more suited for businesses with bad credit, such as merchant cash advances.
You must be honest with yourself, as well as your bank – taking out a loan means you must be able to make the repayments, so make sure you don’t overestimate how much you can afford to pay back, as this could leave you in financial difficulty.
Choose a loan type
One of the most important steps in applying for a loan is deciding which option is best for you. if you’re looking for funds specifically to grow your business, a business loan from a bank could be advantageous, as there are no limitations on what you can spend it on. If you’re looking for a way of financing expensive equipment or machinery, and equipment finance loan would be the best option. Having an idea of the type of loan that would suit your requirements is key when applying, make sure you do your research and weigh up the pros and cons of each to find the perfect solution.
Prepare documentation
When applying for a loan, your lender is likely to need a range of documentation to get the approval process underway. You should make sure you give all of the information requested as accurately as possible so that your application isn’t slowed down for any reason. You should prepare documents like tax returns, personal and business bank statements, as well as profit and loss information. You could also be asked for cash flow projections, as well as up-to-date accounts.
Apply
The only thing left to do is apply. Depending on the loan you choose, the length of the application process will vary. Loans from banks like business loans tend to take longer than an option like a merchant cash advance for example. If you need your loan quickly, choosing online lenders may be advantageous so that you can track your application from beginning to end.
When applying for a bank loan, you may be asked to go into the bank for various appointments, which has its advantages; you can ask an expert any questions you may have and get an answer straight away, however it may be time-consuming. If you apply for a loan online, you can provide all you need with the click of a button, the only drawback is if you need help, you may have to wait longer for a reply.
Approval
Waiting for your finance to be approved can be nerve-wracking, but if you’ve supplied all the necessary documentation, and decided to apply for a loan that is suitable for you – you’ve given yourself the best chance! If your application is rejected for any reason, you should consider why that might be. You can learn from a loan refusal to get yourself to a better position next time.
