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Many small business owners won’t have the extra funds tucked away in a savings account to pay for new equipment, hire employees, make the payroll, or expand the company. Several financial options are available, but the traditional route you may select is a bank loan. Unfortunately, not everyone knows how to get a bank loan for their business, and have very little idea of how to influence a bank’s lending decisions.

The process of getting a bank loan isn’t easy. You can’t simply fill out an application form and get the money instantly in your hands the same day. The bank manager will have to review the loan information as they will look for several specific factors in your documents to determine if you qualify for the loan. 

These factors help the bank manager determine how much  of a risk your business is at defaulting on the loan or if you have enough financial stability to pay back the full amount. By having a clear picture of your business model and your plans for the future, the easier those banks will find making their lending decisions.

Here is a list of four things a bank manager will look for when you are seeking a loan.

A business plan

A bank manager has to know what type of business you are operating and how much market demand there is for your products or services. A business plan helps the bank figure out whether you have researched the current market, how your product or service fits into your particular market segment, what the current financial health is for your business, and how you are bringing in profits. 

While not every bank manager will request a business plan, it can still help you plan out the necessary steps to expand and grow your business. If you’re still unsure whether or not you need a business plan, remember that knowing how to get a bank loan is one thing, but walking out of a meeting with your bank knowing that you’ve secured funding is very different. 

If you want lenders to make lending decisions in your favour, then a well-researched business plan is essential. Download our guide to business plans to find out more about how to create the perfect plan for your business.

Financial assets

What do you have for security that will cover the bank loan if you can’t repay it? The bank manager will look at all types of assets to lower the risk the bank will take on when granting the loan. This security can consist of several things, including the equipment you plan to purchase or have on hand, existing inventory, or even personal assets such as a home.

Banks will know how to get a business bank loan for you, but you’re going to have to put the work in. So alongside your business plan, you need a complete breakdown of your financial assets. This will include all financial reporting so that your lenders have a better picture of the financial health of your business. 

The more thorough you are, the more likely your bank will make their lending decisions in your favour. And that’s only good news if you’re getting ready to launch, rebrand, or explore new profit streams.

Future financial projections of cash flow

A bank manager needs to know your cash flow to see that you can pay them back. If you are an existing business that has been operating for several years, this is easier. Your historical cash flow reports combined with analysis reports of your future financial forecasts will be used to see if your cash flow will remain strong enough to repay the loan, even during the times when the market fluctuates.

Cash flow can be a daunting subject to explore, but it doesn’t have to be as complicated as you might think. If you’re not sure how to prepare cash flow forecasts, then don’t worry. We’ve written an entire guide on it. Whether it’s part of trying to get a bank loan or simply as part of your day to day business management, you can never spend too much time understanding cash flow and its importance.

Loan details

It’s incredible how many small business owners know how to get a bank loan but then make mistakes in the loan details, such as asking for too much money that they could never repay. By figuring out what the loan will be used for, the bank manager will be able to offer the right type of loan for your needs at the desired terms. 

The biggest mistake you can make when applying for a business bank loan is asking for too much money. Banks and other lenders aren’t allowed to approve a loan that looks unlikely to be paid back. The Financial Ombudsman even has entire processes to work through that they call unaffordable or irresponsible lending. So it should be clear that getting the details is one of the most important elements to consider when working through how to get a bank loan.

How to get a business bank loan

Every bank and bank manager is different, and they may also look for other factors to determine whether they will grant you positive lending decisions. Having all your financial information ready, creating a business plan, and offering security to cover the loan can help reduce your business risk and offer a greater chance of getting the loan you want.

Many different funding options are available to businesses which can be read about in our handy guide. In today’s increasingly connected world, investors are more accessible than ever, and their lending decisions can be very different from traditional banks. Make sure that you know all of your funding options, and when you have meetings about lending decisions, make sure that you have all of your facts and figures ready.

If you need help getting your finances in order before a meeting with your bank manager or angel investors, Big Red Cloud can help. Make sure that your cash flow is managed and reported on professionally and that you have a crystal clear understanding of your finances at all times. Contact the team at Big Red Cloud today to find out more about your free trial and how we can help you manage your money and encourage your business to grow.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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