You want to start up a business, but you find yourself unable to come up with the necessary capital. No worries! Just remember that banks will be looking to get a good return on investment. Don’t let that intimidate you though. We will see you through and get the banks in your favour.
Be Specific
If you write something like “Paying payroll” or “to survive a downturn” you probably won’t impress the bank manager all that much. Rather, show realistically how you plan to spend money you are loaned. If you’re going to err, it’s better to pad your account totals and show that you need more money than you are willing to borrow as opposed to falling short. Just come up with a very concise business plan and spell it out in detail.
Demonstrate that you’re good for it
If you are making a profit in your business, your accountant may be the one to make the bank realise this by putting all the numbers together and making sense out of your business. Another way to demonstrate how lucrative you are is by showing that you have a history in that sector of business and can get results. The easier the bank feels about loaning you money, the lower the interest rate and the more likely that you will get the loan.
Shop around
Don’t feel obligated to one bank if they stick you with an interest rate or terms you don’t like. Go to several banks and don’t be afraid to openly refuse an offer. Some banks, like NatWest, offer loans of up to £25,000 without any fees. Be sure you read all the print and ask for the rate and APR on the spot. A truly interested bank should hide nothing from you
Invest on your own
You might have some money that you can put into the business. Even if it’s only £1 for every £3 that you plan to loan, it shows the bank that you’re willing to risk a little bit of your own equity to make this business work for you.
CAMPARI
“Campari” is a list of seven things that the bank is looking for in order to loan you money. It stands for
Character
- Show you have a good management team and you have experience in the industry
Ability
- Show you can repay any loans.
Means
- Show you can run the business the way the bank likes.
Purpose
- Be descriptive; say what the quid you’re borrowing is for.
Amount
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Demonstrate why you need the cash and how you plan to spend it.
Repayment
- Show that you’ll get cash in and your Return on Investment will be appealing to the bank.
Insurance
- Take enough insurance to cover anything that can go wrong.
In conclusion, bank loans can be tricky to get but never feel pressured into something you’re going to hate in a year or two. Rather, feel free to shop around for the best rates and terms for your business loan. It’s your money and your business, but be prepared to show that you have a plan to pay back the banks.