I am of the belief that it is far better not to borrow money for your business but there are times that it can make sense. For example if you have a larger business and need capital equipment or premises in order to expand or make your business more efficient. How do you get a loan from a bank, especially since the start of the banking crisis?
The Right Approach
You will need to prove to the bank that you can run your business well and argue the need for the money and how you will use that money to make a return on it. It is vital that you produce a business plan with cash flow and realistic projections to show that you will be able to repay the loan and that your business is profitable.
Your attitude too when you meet with the banks representative needs to be very professional and look like you mean business. You should be the sort of person that they want to do business with and will trust.
Many governments around the world have schemes to help businesses raise funds to grow. In the UK there are a number of these and it is always worth checking these out first before you see a bank.
There are times when banks have discretion on how much interest they charge to businesses. Don’t be afraid to at least try to negotiate a lower rate with them. The larger the amount you borrow then you should expect a better rate than for small loans. Make sure that you do your research before you visit the bank to get an idea of current interest rates being charged. It also worth noting that banks will charge usually charge arrangement fees and these can be very high.
Always remember that a bank loan could make or break your business. You will be repaying this for some time maybe for many years and you need to make sure that you will be able to repay it. Never borrow money for equipment that will wear out before you have repaid the loan on it! It may be wise to consider leasing equipment rather than borrowing money to buy it.
Use a good Commercial Broker
It will really pay for most entrepreneurs to find a good Commercial Loan Broker to help you find the best deal and do all the necessary preparation to have the best chance of getting the loan. Ask other business owners for their recommendations.
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