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When preparing your company for a finance application, it’s key to present the business in its best light whilst also providing realistic projections, your plans for the funding, and how it will help the business grow.
Unless you need finance urgently, you should take as much time as possible to develop a compelling case, ideally with professional support. It's important to understand your figures and the market you serve so that you can demonstrate how you would deal with issues that might arise in the future.
A well-considered business plan with supporting documentation offers reassurance to lenders that you understand your figures and can afford the repayments for the loan term. This, in turn, presents you as a lower risk to them.
So, what do you need to consider and how do you best prepare your business for a lending application?
Lenders need to see comprehensive cash flow projections that clearly illustrate your business’s positive cash situation mapped over time - without sufficient cash, the risk of defaulting on the loan increases.
If you don’t already use cash flow forecasts, it’s important to incorporate them into your everyday financial management. In fact, they're vital to maintain control over your business’s cash situation whether you’re applying for finance or not.
You can reassure lenders that their risk is low by presenting evidence of positive cash flow over the months leading up to your application. This can result in better deals, including lower interest rates and higher lending amounts.
As well as operating with a positive cash flow, your business’s credit rating is a key factor in whether you’re accepted or rejected for a loan. If your credit score is high, you pose a lower risk to a lender, and vice versa.
For example, if your company’s credit file shows historic repayment issues, such as defaults or County Court Judgments (CCJs) it can lower your chances of being accepted for a loan or negatively affect the cost of borrowing.
It’s never too early to start a business plan when you’re looking for funding. A business plan is a comprehensive document that offers lenders a complete picture of your enterprise, your key goals, and how the funding will improve profitability.
You should present a market and competitor analysis, financial forecasts, marketing strategies, and information on suppliers and target customers. Noting your skills and prior experience can also reassure lenders that you understand your industry and that their funding is in safe hands.
Effectively preparing your company for a finance application takes time and careful consideration but we can help you at every stage. Our experienced team at UK Business Finance consistently helps clients secure the commercial funding they need using our market knowledge and close attention to detail at the preparation stage.
We can also make an application on your behalf and liaise with lenders throughout the process. Please get in touch to discuss your plans – we operate offices around the country.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.