Normally, lenders will conduct an in-depth examination of a business before they approve anything. Specifically, lenders will ask a lot about the financial history of the business. It’s best if you come up with a detailed and convincing plan when making your business loan case. Include your profit and loss plus your cash flow forecast. The lender will not only benefit from this but you as well because you can have a consolidated view of your business.
Your loan outcome hugely depends on your preparation. Here are more tips:
Asses the Risks
Most lenders will examine your business risk profile when considering to give you a business loan approval. Find out what they want and consider as risky to position yourself in a positive light. Generally, lenders look for these:
nature and level of your security (they look at what you offer to see if you can repay the loan or not)
your repayment capabilities including other debts you have (if applicable)
Look at your cash flow and operations. You have to be able to tell or project your business risk depending on specific circumstances. Cash requirements projects are often the most important for lenders.
Perception of Risk
After understanding your business risk, you also need to understand the factors affecting perception of risk of your lender. Some of the risk factors include according to Business Victoria:
- start up businesses incorporate financial, business and management risk
- lack of security
- lack of business history
- industry sector, factors will include levels of competition, barriers to entry, profitability profile and current economic conditions
- highly seasonal businesses, for example swimwear and agriculture. You’ll need to demonstrate how you’ll deal with cash flow pressures in the off season
- lack of planning, market knowledge and finance skills
- poor credit history
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