Most applicants go into the loan process with the disheartening idea that banks don’t want to give them a loan. In fact, it benefits the bank to approve your loan application as the interest accrued on the money you borrow is a valuable stream of revenue for them. But you need to present a strong case for your business and your plan for its success, so they are convinced that you will be able to repay the loan. 

You can present a convincing case to your bank by following five simple tips.

  1. Provide Accurate Accounts

The bank manager or loan officer will need to see your company’s financial paperwork along with your loan application.  This could be anything from account statements and balance sheets to tax returns and business plans.

There are two ways to present this, the conventional way is to submit hard copies, and the other is via accounting software. You could even go a step further and organise for your data to be sent straight to the bank’s feed from your business account. Your loan officer is more likely to trust this information and his or her confidence in your data will further your cause.

If you’re opting to submit hard copies, ensure you double check that all the sheets are present and accounted for because a lot of applications get held up only because one or two documents are missing. You will be given a list of documents to submit and key amongst them would be paperwork that indicates how your business is likely to progress in the years to come. 

  1. Preparing and Presenting Your Case Well

Think about your case from the loan officer’s point of view. This allows you to make an educated guess about where his or her concerns would lie. Understand how the bank evaluates risks and if your business does have risky aspects, what solutions can you come up with to mitigate them? You need to plan and prepare well in advance. Look for weak arguments in your presentation and prepare to field tough questions about them. 

Don’t forget that loan officers are people too, so make assessing your loan easy for them – don’t walk in there with masses of numbers that they need to interpret. They will lose interest. Carry graphs and charts that are easy to grasp and that will help get your point across. And don’t forget how powerful storytelling is. Use it to get them to see things your way. 

  1. Working Closely with Your Accountant

Your accountant will be well versed in the way that loan applications work; they will be able to help you put together a convincing case with the necessary figures to back up your vision. Banks or any lender will have more faith in an application when they know an accountant or a financial advisor has put together the paperwork and crunched the numbers. 

See How a Good Accountant can help your business

  1. Branching Out to Easier Options

The traditional bank loan application method is not the only option anymore. Some Fintech online lenders do not worry as much about the formal application process and are happy to review your case online. This becomes easier if you have already made the move to cloud accounting. Rather than having to wait for weeks to hear back from the bank, online lenders can assess your data in days. These individuals or companies decide based on the data that has been presented to them. Rather than being concerned with a business plan or your credit score, they focus on the collateral you’ve put up, the assets you have, the quality of your management team, and current profits or profit projections. 

The added benefit of borrowing from an online provider is that they generally offer you a line of credit, rather than a conventional loan. So once your application has been approved, they extend you credit worth X amount but you are not obligated to use all of it. And you only pay interest for the amount you use. This gives you flexibility and security because you know you have access to more money should you need it in a hurry. 

  1. Invest in Modern Accounting Tools

Financing a business used to be difficult for everyone. Even those who had good relationships with banks did not have any guarantees. Once applicants provided tall piles of paperwork, the bank had to verify that information was accurate, and at the end of that gruelling period, there were occasions when things fell through as the loan wasn’t approved for one reason or another. Today, things are much improved from this standpoint. Accounting software is now able to share secure, verified information directly with the lender to make the process easier on both parties. 

Common Reasons that Loans are Rejected

Ineligibility: Before you even begin this process, remember to check if you tick all the right boxes on the lender’s eligibility criteria. If you do not, the loan will be rejected no matter how well your presentation goes.

An unconvincing cash flow analysis: If your projections show a cash flow that is insufficient or barely able to repay the loan, (after accounting for regular operating expenses), then you’re not likely to persuade lenders to approve your application. To improve your cash flow you could try working with your accountant to trim expenses and create an emergency cash reserve. 

Risks related to national and international economic trends: The nature of your business becomes important when lenders are considering the possibilities for its success. Changes in government policies, prices of raw materials etc. could all influence this. For instance, travel-dependent businesses will have a hard time securing a loan during a pandemic.   

Not having a clear plan for the money: Not only should you be able to convince loan officers that you will be able to pay your loan back but also explain why you need it in the first place. Put forward a clear plan and budget how you’re going to be using the money. Work with your accountant on this. It is helpful to also add how this will contribute to the overall growth of your business. 

No matter how much easier the lending process is these days, taking a loan is never a light matter for any small business. Be sure to take your accountant’s advice into consideration and choose the optimal time to take a loan. Use the money well and stick to your repayment plan to avoid losing your collateral. 

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