10 Tips to Secure your Business Loan

It’s no secret that cash is king when running a small business.

More so when starting a business which brings another age-old truth comes to mind – you need money to make money. Today’s world of innovative banking has lenders from all over the globe simplifying processes through various online loan applications. While this reduces the amount of paperwork, it creates a virtual minefield for business owners.

Let’s face it, while the internet is making our lives much easier, there is still some apprehension in the air when asked to share your private information online.

Here are some tips to help you make the right decisions when selecting a suitable lender for your business loan.

Get your ducks in a row

Your business plan is the basis of your business and lets lenders know you mean business.

Make sure your plan is comprehensive, up-to-date and is an accurate reflection of your current financial situation and future plans. The business plan must be supported by your official company documentation. Be proactive - give them what they need before they ask for it.

In addition to preparing it, you must always be very well versed in the contents of your business plan. The lender will scrutinise every bit of information containing your plan and you should be ready to answer and maintain professional discussions regarding your businesses current status and future potential.

They must believe in your dream as much as you do.

Fortune favours the brave

Give it a go - you won’t know how much cash flow could be coming your way until you try!

Surf the web and select your favourite financial service provider. Chances are that they will have a quick loan calculator, this is the first step to realising what’s out there. Regardless of the outcome, follow through with a complete application by making a personal visit to your bank of choice. Here you find useful information on your personal and business financial viability.

Be sure to have your business plan with you. The connections you make here could be the start of a fruitful and professional partnership that takes your business to the next level.

It's not personal, it's business

So you have some loyalty towards your lifelong bank, this doesn’t mean that they will give you the best offer.

In fact, shopping around increases your chances of securing a business loan. So when you take the leap of faith discussed in the point above, send your feelers out to more than one lender. While there are many similarities, lending criteria varies from lender to lender so what may be the deal-breaker for one lender, could be the deal maker for another. Shopping around also gives you personal insight and understanding of the lending market – useful knowledge that empowers you to compare lenders for yourself.

Do the math

Let the numbers speak for themselves.

Just like your business plan needs to be an accurate reflection of your business potential so much must your financial calculations. Be clear on the amount needed and what the return on investment for your business will be. Provide a clear outline of key assets and liabilities which the funds would contribute towards and demonstrate depreciation and growth levels throughout the lifespan of the potential loan term.

While applying for a large amount may be tempting, a lower amount coupled with sound financial management may be what it takes to seal the deal.

All good things come to those who wait

The application is only the start of the process.

Once this is complete, lenders undergo a range of investigations and checks to ensure you and your business are feasible investments. This process can be time-consuming so do not become dismayed as this is standard business practice. It is important to factor this time frame into your planning when making the application. Don’t only begin the process when your cash flow is fast disappearing, be realistic about your financial status and get the ball rolling sooner rather than later.

Once the application is in motion, be patient and remain positive about its outcome.

Don't stop moving

Potential financial investment should not stop you from growing your business, it should inspire you to continue working hard.

Some lender investigations may include unexpected site visits or engaging with your staff or peers. However, regardless of whether they are watching or not, you should grow your business to make it a viable investment for current and future investors. When your business shows positive growth and ownership of valuable assets, your chances of obtaining a business loan in the future is increased.

Brick by Brick

Dreaming big is the stuff legends are made of but that big break that you are seeking might not be within reach right away.

This is why a realistic financial plan which meets your current business needs coupled with a future forecast may be what you need to convince the lender that you’ve got it takes to make this work.  Ensure that the loan amount request doesn’t appear too exorbitant.

Don't give up

While getting business finance can be a tricky and complex process, it is not impossible.

Should your first or second application be unsuccessful, explore different ways of presenting your business and its future potential? You can even find different revenue streams for your business that will make it a lucrative investment now and into the future. Setbacks are only opportunities to harness your inner talent and get innovative – challenge the status quo when it comes to your business model, become eco-savvy and find sustainable ways of running your business, collaborate with like and un-minded individuals to break barriers and become a force to be reckoned with.

Look within your network

Who better understands your vision, goals and potential than the ones who know you the best?

As unconventional as this may seem, personal loans from family and friends has become a major source of finance for businesses around the globe and in this country. Identify potential investors within your personal network and treat them with the same professionalism as you would treat an organisation. Present your business and financial plan to them with passion and promise to foster their commitment to both you and your venture. This initial investment could spark interest and drive the investment of professional financial service providers in the future. 

So a business loan from a professional financial institution may not be a viable option for you right now.

Here are other ways in which you can become savvier and make your money go further.

Collaborate with peers and competitors alike

So you’ve tendered for a big contract but do not have the funds to commence work, your loan application is still pending and you’re strapped for cash. Consider collaborating with a like-minded industry peer or competitor who has the financial and operational resources to get the ball rolling. This sharing of the workload will mean sharing profits too which isn’t ideal however it proves to your clients that you are capable, creates the right impression and increases your chances of being awarded future tenders too.

Engage with suppliers

Just like fostering positive relations with your peers is good for your business, so is doing the same with your suppliers. Play open cards with them and explain your financial situation so that they are open to longer-term payment agreements. Standard payment terms are 30 days, you should negotiate for 90 days or more as this will free up your cash flow to meet immediate payment needs and give you time to accumulate more money.  Having a good credit record with suppliers is essential when considering this option especially if your business nature is dependent on contact and ethics.

Negotiate with clients

If a client has deemed you capable of achieving their objectives in awarding you a contract, it means they have confidence in your business. Build on this trust by displaying business savviness through negotiating realistic payment terms. As a starting point, a deposit can be provided by the client as a commitment to proceed with the contract.  You can also negotiate for progress payment at strategic project milestones, this holds you accountable for completing the tasks within the required time frames and provides you with the cash flow needed to proceed with the work. Don’t shy away from these tactics in fear of losing the contract, driving these negotiations will result in a win-win for both you and the client.