Making a loan application can be a difficult job for a small business but a key aspect to bear in mind is banks and financiers tend to be more responsive to a professionally prepared finance application than a verbal or hastily written form.
The bank wants to see that you have a business plan and are using to it; you have a vision for where the business is heading plus that crucially you know how the loan will be made good.
Besides submitting basic data in your submission like the type of your company, the amount of money, the period of the funding and etc, it is necessary that you appreciate the risk factors that go with the request.
There are several risk factors to be considered including: the danger of exceeding the budget, loss of supply of components required for production, rates of inflation, weaker demand for and price of product, governmental influences and economic factors. You need to comment on each risk element and advise how the risks will be addressed.
Ensure you research precisely what the lender or investment company will want to see prior to making your application. To support the answer you want you have to present a complete and true submission which addresses all the relevant aspects the financier will want answered.
Five Cs of Finance
Lenders use a format they call Five Cs of Lending in determining whether they will fund an applicant. These are:
Character - the reputation of the applicant?
Capacity - can they repay their loan?
Collateral - the type of security?
Conditions - what is the market place doing in that particular industry or location?
Capital - what is the present financial position of the applicant looking at the balance sheet?
In conclusion
Banks need to lend capital to companies - that is their business. So they will be sympathetic if your company has a strong, professionally application. In order to secure the business funding you looking for your expansion, it is important to remember that one word - business. The banks will be considering you as a business so it is vital that you behave and present yourself as a business. It is no coincidence that the first of the Five Cs is character. Investors invest in people not ideas.
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