Securing funding can be a challenge for small businesses looking to grow. The reality is that unless you are in the very fortunate position to have the capital in place to fund growth you are going to need to try and borrow the money to fuel expansion. For most SMEs, this means trying to secure a business loan.
These types of loans are generally at the smaller end of the scale, between £500 and £100,000. The average loan amount in 2022 was just £14,000 with repayments made over a period of several years. These types of loans are usually secured from lending institutions such as banks, credit unions or specialist small business funders. They are also secured for a number of reasons but usually revolve around paying for the every day and upfront costs of running the business in a way that supports growth, such as renting office space and purchasing equipment. It can also be useful for onboarding new staff or investing in inventory.
Although the exact details of your SME business loan will vary according to your position and the demands of your lender, there are some general requirements you will need to meet. The below business loan checklist should help you understand what you need for a business loan and help you get everything in order before you apply.
There are some basic requirements for all types of lender when it comes to SME business loans. You will be required to provide six months worth of business bank statements and a full set of your most recent year end accounts. You will also need to provide a profit and loss sheet which shows turnover and profit. Personal identification and proof of address will be required prior to any drawdown of funds.
As well as your basic business information and details about your current financial position, brokers will also assess your credit score, business financials (including revenue, cash flow and profitability). They may also require some collateral against which they can secure the business loan, in the form of an asset or even a personal guarantee. The length of time your business has been operating may also impact your eligibility. For example, brand new businesses may find it difficult to secure a loan as it is much harder to demonstrate profitability.
All types of loan require you to go through the application process, although the length and scope of this will vary according to the type of loan. It is a good idea to gather all the necessary documents and complete the application form accurately. You should also be prepared for follow-up questions and to be able to clarify any further details the lender may require.
Providing false information can lead to loan rejection, unrealistic expectations and loss of trust with brokers. Honesty is always crucial for the protection of future borrowing opportunities. It may even be a legal matter if you knowingly provide false information to a loan provider.
If you are unsuccessful in qualifying for a business loan, it can be very useful to seek feedback from the broker on why your application was rejected. You can then work on addressing those issues to ensure successful future applications. You can also check with other brokers or explore alternative funding options, such as government-backed loans which may have more flexible acceptance criteria.
Check eligibility for a business loan or speak to our advisors about what you need for a business loan, suitability and terms and conditions.
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