Start-up businesses are often the first that come to mind when talking about finance needs, but if you are running an existing established business you might also need additional finance to grow, or just to improve your cash flow.
No matter how good you think your business plan is, without the finance to back it your business will not get far. By following some of these simple guidelines you may increase your chances of getting your loan approved and your business off the ground.
What do you need to know about it?
There are many different types of loan and also many organisations that deal with different types of business. When applying for a loan, try to find out which organisation it is best to send your application to. Company Partners helps by using a form which steers your request for a quote to the best choices.
Some of the reasons that businesses fail in their applications are:
- Bad work at the planning stage.
- Business plans that make assumptions (or huge leaps of logic) without the research to back it up - poorly thought out financial plans would fall into this category.
- Badly written and presented business plan - If your business plan is poorly presented it may not even get past the initial phase of consideration.
Competition
You are probably not the only person who has thought of this business idea. If it is not a new idea but one that is filling a lack in your area or sector, do you have any competitors? It always pays to know the competition.
Drawing up the business plan yourself
Not knowing what is in the business plan or being unable to answer questions on it will not help your cause. Professional advisers may be able to draw up a plan for you, but you still need to be able to present and explain it. Although you should be able to answer questions on it, it should be self-explanatory where possible.
What do you need to do about it?
Make your application snappy! A long and windy business plan with your thoughts on every aspect of the business is likely to bore the reader.
For the plan to succeed it should be:
- Interesting (write it with your target reader in mind)
- Short (15 pages rather than 50 pages)
- Clear
- Easy to understand
If you must use anything other than laymen's terms, make sure you explain the terms you use. Avoid huge unbelievable boasts and claims. Backup any claims you make with evidence, or at least sensible logic.
What will the lender be considering?
These are just some of the areas that the lender will be paying close attention to. It will increase your chances of success if you bear these in mind when you are writing your business plan:
You
The lender will want to have confidence in not just the business plan, but also the other things that make a business work. The organisation, the management, the workforce and the product or service will all be of interest.
Time
Allow enough time for approval to come through. It is best not to state in the timescale that you are relying on the lender to come through for you to keep to the timescale. There is no guarantee as to how long a decision will take.
Finances
If your idea is unlikely to make any money you will not get the loan. This sounds like a simple concept and it is. Make sure that you back up all the statements you have made with profit and loss projections and cash flow charts, and show the reasoning behind your projections.
Failsafe
Show that you have consider the risks / threats and that you have strategies to deal with them. Without being overly pessimistic, it may serve you well to show that you have considered the worst-case scenario and what security you are using to back up your business plan if it fails.
Marketing
This is also something that lenders will be interested in. What is your marketing strategy? How will you sell your product / service? How will it be distributed? A much overlooked area. This should be included in your plan.
This is a guide. It may be helpful for you to also talk to a professional in finance provision.
