Posted: Wed 27th Aug 2014
It seems like a broken record these days. Complaints about banks not lending to small businesses, and then banks saying they are lending. The truth is somewhere in between and there are some easy things you can do to help your application for funding.
Tip one: Ask your bank if they want to lend to you
This seems basic but once of the main reasons banks don't lend is because they don't want your business! Don't take this personally, it is not detrimental to your company and is nothing personal, it is just a commercial decision the bank has taken about where they will lend.
Many banks have different criteria for different industries, ask your bank what applies to you, what their criteria are and what their appetite for your sector is. You can then apply your efforts accordingly.
Tip two: Apply at the right time
Once you know who will lend to you then give some thought to when you apply. Normally the worst time to apply is when you need to borrow. Sound strange? Bear in mind the old adage that a bank lends an umbrella in fair weather and takes it back when it rains. So follow these simple tips;
Apply during the last quarter of your financial year, even if the actual need is a few months off. This way you can provide the lender with last years full accounts and a P&L up to date. Many lenders will agree to advance your money subject to the full year accounts showing X, Y or Z. At least you now know what you need to report and can model things around this.
Having a P&L and Balance Sheet available is a must and there's no excuse for not having them these days with cloud based bookkeeping platforms like Kashflow, Xero or Quickbooks generating these reports at a click of the mouse. Show them to the lender as they want to know that you know what's happening in your business.
Always seek funding during your busiest period. It is when your business looks the rosiest. Once you have a finance offer then sit on it, delay it, whatever you need to do until you really need it.
Business finance is like anything, the more you know the easier things get.
Dave Farmer is the founder of award winning Lime Consultancy. A business finance advisory working with small businesses across the UK. Visit the Lime Consultancy blog to access more articles and funding tips.