A recent survey found just 3% of UK small businesses start up with the help of a bank loan. However with that said, business loans are still a viable way to expand or invest in the future of your business. You’ll notice that a bank loan and a business loan are not one and the same thing; business loans can be sourced from more than one place. There are even grants available from the government for new and innovative start up ideas. Sow how to apply for a business loan?
If you are considering applying for a business loan, the following pointers should help you achieve the desired outcome.
Know how much you’d like to borrow
Asking a bank manager (or other lender) for ‘about five or ten thousand pounds’ will raise red flags and reduce the odds of getting the cash you need. If you are thinking of getting a loan you should know what the loan is for and thus how much you require. For example, it might be for new computer equipment, new premises or perhaps to get up and running in the first place. You will be expected to back up your request with proper information, so make sure you’re prepared with facts and figures and have a precise idea of the amount you require.
Don’t forget your business plan
Most people are aware a business plan is required when applying for a start up loan. However it also comes in useful if you need a loan to help you expand an existing business.
Whoever you go to for a loan, they will want to see figures that point to the need for a loan. They’ll also want to see projected improvements to the business in terms of the bottom line. For example, if your loan will help you invest in new and better equipment this should lead to a higher degree of profit. This in turn will help pay back the loan, however much it might be.
Know who to go to for a loan
The banks are the first option to come to mind. However they are not the only option available. For example there are several websites offering crowd funding where individuals can invest in start-ups. You can generate your funds by appealing to thousands of potential investors.
You may also want to consider asking friends or family members for a loan. The process should still be done professionally and with a contract though; some people have fallen out with friends or family members because of a loan, so tread carefully.
Alternatively if you only need a small sum of money you may be able to apply to your bank for an overdraft. A loan isn’t the only option you have. You could also save some of the profits your business has already generated and use these to support your business instead of going to someone else for assistance. Personal savings are another option.
As you can see there are several options to consider, so if your bank isn’t forthcoming all is not lost – and that has to be good news.
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