What helps make your bank manager say ‘Yes’ to a new business loan

This guide should give you the confidence to get started on the route to securing the finance you need to proceed.

In brief

• You: sell yourself

• Your business: sell your idea

• Your plan: essential documents

• What to do next

You: sell yourself

“Bank managers will want to see solid evidence that your business has the means to pay the funds back – as well as enthusiasm for your idea”

Now more than ever, it’s essential to talk your bank manager’s language when you want to secure a loan to fund your start-up. You’ve had months, even years, of thinking about your business – what a great service you’ll offer; how you’ll be able to fit work around your family; what fantastic profits you’ll make, but bank managers will want to see solid evidence that your business has the means to pay the funds back, and they won’t be swayed by pure enthusiasm for your idea (although this will definitely help).

Go back over your track record in employment and business and quantify the skills and experience you will bring to your venture. This is about more than rewriting your C.V., it’s about pinpointing your strengths, recognising your weaknesses and showing examples of both. For example, you might have twenty years’ experience managing a team for a previous employer; you could have overseen the successful sales strategy for a new product; perhaps you’ve already worked in your chosen sector and know it intimately; you may even have launched a business before and learnt from its success or failure.

Put any relevant information in your business plan and back it up with solid evidence – testimonials from past customers and employers; any awards or industry recognition; the records of people who have worked for you. Combine a passion for your business with a real understanding of the unique skills you can bring to it, and you’ll do a lot to convince a bank manager that your funding application may be worth a closer look.

Your business: sell your idea

No business is recession-proof, but, showing a bank manager why you think your business will work now, when the economy is in a downturn, will give you a head start when it comes to funding. Before going into any finance meeting, consider these questions that a lender is likely to ask:

• What is your business idea?

• How do you plan to develop it?

• Who are your customers?

• How will you market your business?

• Who are your competitors?

• How will you fund it?

• What is your vision for its future?

• How is your business sector performing?

• Could you buy a business rather than starting one from scratch?

• What is your credit history?

• What capital do you have?

• Will you be able to service a loan?

• How much security can you offer?

By researching the answers to these questions, you will develop a believable, measurable, promotional pitch for your start-up idea. Practise what you want to say and how you want to say it. Do this in front of family, friends, other business owners and professionals, such as your financial advisor or solicitor. They can help pick out points that are unclear, pinpoint any gaps in the information, and hone your presentation to give you the best chance of success.

Don’t expect any bank manager to just take your word for how great your business will be. You’ll need to back up your argument for funding with documented research and thorough financial forecasts.

Your plan: essential documents

A strong, clear and concise business plan is the strongest tool you have for securing funding.

While every plan contains the same basic information , a smart plan will tailor details for the person reading it; in this case, making sure you show a bank manager when and how they will get their money back.

The current economic situation also means that banks expect a more extensive level of detail when it comes to profit forecasts and cashflow projections.

It may not be enough to show a year’s profits; monthly and seasonal breakdowns will illustrate the real financial nitty-gritty of your business.

“A concise business plan is the strongest tool you have for securing funding”

Do your financial homework and prepare these documents before you ask for your loan:

• A complete business plan, with details of your capital, cash balance and cashflow patterns, profit and loss forecasts, and sales forecasts for the next three to five years

• Your assets and how you will secure the loan

• Past three years’ accounts for any previous businesses you have run

• Employment record, highlighting significant achievements

• References and testimonials from previous employers and customers.