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It is no secret that the Government feel that more must be done to by Banks to help Businesses.
The Prime Minister has already made his intention to put pressure on the Banks to up their Business lending clear
Despite these facts many Businesses will see their loan application declined with potentially devastating consequences.
There are many reasons why Business loans are declined, but here we list the three most common mistakes Businesses make when applying for a loan.
If you are considering applying for a Business loan, make sure you get a head start by learning from the mistakes of others.....
Badly Managed Bank Accounts
One of the things lenders will look at is the way in which you manage your Business banking. If a lender looks into your account history and finds that you have missed payments or have a tendency to go over agreed credit limits, it will cause them concern and could lead to your application being declined.
Managing your Business Bank account well is extremely important. Make sure you are fully aware of what payments you need to make, when they will be taken and how much will be taken. Most importantly make sure you always have funds in your account to meet your commitments. If you find yourself in a position where you may struggle to meet one of your commitments, get in contact with your Bank and give them plenty of notice. You may find that the Bank can increase your credit limit or offer an alternative solution
A Lack of Information
It's suprising how many Business loan applications are turned down simply because the lender couldn't get a true picture of the Business from the information provided to them. If you are going to apply for a loan make sure you have a complete Business plan and forecasts. If you are aware of any issues that may cause the lender concern, address these issues head-on and provide any additional information that can help ease the lender's concerns even if they do not ask you for it.
Cash Flow
Regardless of how profitable a Business is a potential lender will need to see that it has a good cash flow.
If you would like to improve your cash flow you could use the following strategies:
Keep an accurate inventory of your stock and only order what you require - Many Businesses make the mistake of ordering stock even when they don't need it just because they haven't kept a close eye on what they already have
Invoice Quickly - Delays in sending out your invoices will definitely result in delays in payment. When it comes to sending out your invoices make sure they are go on time, every time.
Offer discounts to customers who pay their bills quickly - Many customers will see this as a real incentive to pay you on time and it could significantly improve your cash flow
A Golden Tip
Aside from avoiding the three major mistakes listed above there is one last tip you should be aware of. Understanding what will be required from you by the lender you approach for your Business loan is critical if you wish for your application to be successful.
In order to give your application the best possible chance of success, talk to the lender before you apply. Make sure to ask your lender exactly what they will require from you so you can ensure you have it before you apply. Also make sure you check what you can do to increase your chances of success, many lenders will be happy to help by providing you with their own tips
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