Securing a bank loan for your business could be one feisty adventure. This is due to the rigorous process banks undertake in deciding who gets a loan and who doesn’t. However, you can make the process tilt slightly in your favor. Know how? By coming to the application process prepared.
Naturally, banks offer large loan sums, sums that will go a really long way in moving your business to the next level. Be that as it may, getting acquainted with the relevant requirements well ahead of time will set you on the right track in terms of preparation and conviction.
Is it the necessary paperwork, individual character or business interests? Proper research before submitting your loan application is actually vital to your plans for securing a bank loan for your business.
Some businesses even go on to hire expert services to provide professional help in this regard. While that is not an altogether unwelcome action, simply paying attention and understanding the following tips for securing a bank loan should set you off in the right direction.
1. Do Your Homework
The first step, which actually might seem trivial in securing a bank loan is to do your homework. Taking a loan is a really important business decision you might have to make. This process of decision making must include in-depth research on a variety of options and alternatives. Trust me, you do not want to have debts hanging over you a few years into starting your business.
Though most bank loans come with a high-interest rate, it is important that you compare the various business loan options available for small businesses by major banks in the country. Most resources are available online but do not restrict yourself. You could visit these banks in person and talk with the bank manager, who most likely is saddled with approving your application or not.
Ascertain the necessary requirements like interest rates, documents needed, repayment options, etc. For more reading, here are some factors banks consider while reviewing your application.
2. Prepare Your Documents
Another noteworthy constituent of a good loan application, which is vital for securing a bank loan is an accurate and well-prepared document. Many loans are denied because of a superficially-prepared document. As mentioned earlier, a loan is a serious subject that must be given the requisite attention.
Depending on the loan you’re seeking, your bank might want strong security as collateral and as a borrower, you must also be able to provide documents that show your ownership of a valuable asset. The documents accompanying an asset or property listed as collateral must include the original title deed, land tax receipt, building tax receipt, possession certificate among other relevant documents that you will find out when you visit the bank.
The financial activities of your business must be as lucid as possible while your financial, accounting and tax records must not only be up-to-date, but also accurate. You will be required to show documents concerning the business such as the Business name, Memorandum and Articles of Association, Partnership Deed (if it’s a partnership), Certificate of Incorporation, Tax ID, Business plan, Cash flow projection, Balance Sheet, Amount needed and others which it is your duty to find out about. If you have all these readily available, a signature of approval on your application form would be guaranteed.
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3. Specify Loan Amount And Usage
Here is another tip for securing a bank loan. Much has been said about being transparent and accountable in your dealings with the financial institution. Part of that transparency includes the loan amount you seek, as well as how you intend to make use of the proceeds. But first, you must ensure not to ask for too much money than you actually need. This is important so you don’t add unnecessary costs to yourself.
The borrowing institution wants to know exactly what you intend using the money for and if they share your ideas. Will the loan be used to get the equipment or capital expenditures? Will it be used to expand the business or to hire more capable hands? Or is it the aim of the business owner to enhanced sales and marketing efforts?
Perhaps it is also your intentions to delve into new research and technology or to either develop a new product or restructure already existing ones.
All these must be carefully analyzed and inserted in your loan application to show high-end knowledge on the part of the business owner.
4. Carefully Analyze Your Options
Now, this tip is not just about securing a bank loan, it is more about acquiring the right offer and plan for your business. Many people think the process of securing a bank loan for their businesses stop when they have been made an offer, but as I mentioned at the onset of this piece while deciding where to pitch your loan application, you do not necessarily have to place your eggs in a basket.
There are large banks and so are there small banks, each having its peculiar pros and cons. Your choice of bank will depend on the kind of funding you’re seeking, as well as the height of your business.
You do not want to go to large banks as a small business owner and this is because large banks have often got their attention fixated on bigger clients because larger loans mean larger profits.
Either way, when presented with a loan offer, you must carefully analyze your business needs alongside the options of alternative lenders to determine the right fit for your business. Some details to review include:
- The interest rate on the loan and how it varies over time?
- How often the interest is payable, that is, is it payable on a weekly or monthly basis?
- What is the loan origination fee?
- Are there other costs or fees, perhaps, administration fees, loan processing fees, etc?
- What are the circumstances under which the lender can call a default on the loan?
- Is any collateral required?
- Does the lender require the provision of periodic reports or financial statements?
- Are there restrictions on how proceeds from the loan can be used?
These tips on securing a bank loan are bound to be of invaluable help if carefully considered and adopted.
Remember, the first process involves doing your homework and undergoing rigorous, detailed research after which you must prepare your documents and loan prerequisites, getting them as accurate and verifiable as possible, and if possible, seek the help of a professional.
Then you must specify the loan amount and use in your application for the purpose of transparency and accountability while ensuring not to quote a number higher than necessary.
Finally, you must, as a matter of importance, analyze and review your options properly before accepting any offer.
ALSO CHECK OUT:
- Tips For Securing A Bank Loan For Your Business
- 10 Signs You Need To Start Your Own Business
- Five Ways To Get Funding For Your Business
- Top 10 Small and Medium Scale Business In Nigeria
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