In a previous article, I suggested my top 5 tips to help you get a fantastic Business finance deal.
When I drafted that article there were actually 11 tips! So here are a few tips more which combined with the first 5 will help you get not just a fantastic but the best deal when applying for Business loans.
Remember Commercial Lenders receive hundreds of applications per day and have a finite resource to deal with those applications and business finance to distribute. You’re fighting for their attention, their money and your competition.
Being prepared will not only improve the speed of a commercial lenders decision and speed of getting access to funds but also significantly improve the interest rate offered.
Obviously, this will save you valuable time, the scarcest commodity in your Business, and money in future saved interest payments.
At Ashwood Partnerships, my unique process includes preparing you and your Business for business finance Applications, collating all the information, dealing with commercial lender queries, negotiating terms and assisting with implementation of the business finance solution.
If you don’t feel you have the time or expertise to plan, prepare and execute a funding strategy to ensure your Businesses development plans are properly and correctly funded then contact me today.
Tip # 1: “Sell” your Company
Often overlooked so I made this #1 on this list.
You’re the expert at what you do and who you sell to. The prospective Commercial Lenders may have an idea of the sector and market you operate in but not your specific niche and why you’re so great at what you do.
Tell them, as you would a prospective customer, how your business is unique, why it’s successful and how it’s going to grow.
Still with that prospective customer in mind, don’t forget to add proof which in this instance would be your sales forecast.
That sales forecast should show month by month actuals vs forecast and a projection 12 months ahead.
Make it easy for the commercial lenders and show them what impact the business loan will have on future sales growth by highlighting the point from which business funding is received and the impact on growth.
If the business loan is for improvement of processes, then show the impact on reducing costs and consequent forecast increase in net profits.
Tip #2: Demonstrate your stake in the Company
Irrespective of whether your business is a start-up, young & growing or established, commercial lenders will want to know what will motivate you to repay the business loan, especially an unsecured business loan.
They assume you started your business to deliver your passion, (product, service, solution), to a waiting market and always want to. However, the thought of losing money, your stake, will motivate you beyond that passion.
So, if you’ve invested cash, bought assets, have a full future order book and bought stock to fulfil those and future orders then make sure the commercial lenders are aware of the value of your stake.
Tip #3: Demonstrate experience
As per Tip #2 it doesn’t matter if your business is a start-up, young & growing or established your experience and expertise is important.
If commercial lenders have a choice between an owner or management team with years of experience in their sector vs a “me too but cheaper” sector entrant they’ll choose the former.
Equally the choice between a business of 5 years successful trading vs 1 year in the same sector will be for the former.
So, provide evidence of your experience and expertise. Include brief CV’s of the ownership and management. Highlight your competition and then briefly explain why your solution and business is better for the customer.
Include details of any intellectual property you have created, (protected or otherwise).
Brag to the commercial lenders. Don’t assume they’ll look you up on Linked In, the Chamber directory or Google.
Tip #4: Keep up to date financial records
Most businesses are legally obliged to produce annual accounts. Just like an MOT they’re a snapshot in time, only valid on the day and certainly not a basis to manage a successful business.
The commercial lenders want to know you’re a serious business owner and management team. Having a firm grasp on the current financials, future forecasts and historical trends, (sector and seasonal), will help demonstrate that.
For guidance, here are some ideas:
- Provide an analysis of past two years P&L;
- Extrapolate the P&L forward 12 months using your estimate of costs and the sales forecast, (Tip #1);
- Provide a monthly cash flow forecast for the next 12 months, (essential if applying for cash flow funding);
- Produce an interim Balance sheet, compare it to the last formal Balance sheet and highlight the improvements.
Of course, most importantly highlight how the business and finance will be positively influenced by the business loan.
Tip #5: Plan and compare
It’s said that two things are certain, death and taxes. I’d like to add a third, change.
Markets will change, customers buying habits change, competition grows and the economy cycles from better to worse.
For many reasons, all related to change, the sound business foundation you had when it started may not be as stable today.
Planning, measuring and comparing significantly improves your ability to anticipate, mitigate and adapt to change.
So, if the last time you prepared any type of business plan was just before you started the adventure then now is the time to blow off the dust, read it and update it.
Not only might you be surprised by how much has changed, you can use extracts to support your business finance application (Tip #3) and you may also spot a new trend or opportunity.
As part of my process particularly the business fundamentals review for a new prospective Client I always discuss the commercial foundation of the business.
Surprising how many businesses I encounter that do not have a current business plan dealing with, as a minimum, the business proposition, objectives for the year, tactics to achieve the objectives and measures to gauge achievement. An article for the future perhaps.
I hope you found this article useful and wishing you all the best with your business funding Application.