Business Loans
Discussion
I need to know what exactely do the banks look into regarding a Business Loan?
Is it based on not only your business and business plan but your own personal circumstances too? Basically I want to start my business Full Time but cannot due to the finances invovled in the actual start up.
Any help would be much appreciated.
Regards,
Nicola
Is it based on not only your business and business plan but your own personal circumstances too? Basically I want to start my business Full Time but cannot due to the finances invovled in the actual start up.
Any help would be much appreciated.
Regards,
Nicola
What kind of money are we talking about?
If you are looking at say £10k then this is a whole kettle of fish to £100k.
They will have a cursory look over your business plan to get your headline figures, investment, profit, turnover etc. They put this into the computer and this gets a 'risk factor'. If you look like a good bet on paper, then you go to the next step.
They then do a personal credit check on you. If you pass, they then ask how much you are putting in personally. They look at it better if you are showing you are putting a considerable proportion personally. After all, if you are putting your own money in, then it looks like you are motivated not to lose your money as well as theirs.
After that, they will look at security. If you are buying tangible goods or machinery, they may want this as security, or your personal property as a guarantee. At the very least they will look for you to personally guarantee the debt.
The other option is the Small Business Loans Guarantee Scheme. This has set criteria and if they like your business plan in principle then they may recommend this. The benefit to them is that the government pays out a proportion of the money should you default. However, they may still want the personal guarantee for the rest...
How much money are you after?
If you are looking at say £10k then this is a whole kettle of fish to £100k.
They will have a cursory look over your business plan to get your headline figures, investment, profit, turnover etc. They put this into the computer and this gets a 'risk factor'. If you look like a good bet on paper, then you go to the next step.
They then do a personal credit check on you. If you pass, they then ask how much you are putting in personally. They look at it better if you are showing you are putting a considerable proportion personally. After all, if you are putting your own money in, then it looks like you are motivated not to lose your money as well as theirs.
After that, they will look at security. If you are buying tangible goods or machinery, they may want this as security, or your personal property as a guarantee. At the very least they will look for you to personally guarantee the debt.
The other option is the Small Business Loans Guarantee Scheme. This has set criteria and if they like your business plan in principle then they may recommend this. The benefit to them is that the government pays out a proportion of the money should you default. However, they may still want the personal guarantee for the rest...
How much money are you after?
What proportion are you putting up yourself?
Match financing (50/50) is a lot easier to get than a loan for 75% for example.
What are you borrowing for? If you don't mind me asking
If it's for cashflow, I'd look at arranging a simple overdraft facility (most banks offer them free for a period).
Little tip, if you can avoid buying lots of stuff on loans or HP you will start making money quicker - it all has to be repaid. Start small but think big, don't start big and struggle to put food on the table
ETA: If you want to ask me anything, you can always drop me a PM
Match financing (50/50) is a lot easier to get than a loan for 75% for example.
What are you borrowing for? If you don't mind me asking
If it's for cashflow, I'd look at arranging a simple overdraft facility (most banks offer them free for a period).Little tip, if you can avoid buying lots of stuff on loans or HP you will start making money quicker - it all has to be repaid. Start small but think big, don't start big and struggle to put food on the table
ETA: If you want to ask me anything, you can always drop me a PM
Edited by KingRichard on Tuesday 19th February 09:55
On a related note, how does a business loan appear on the balance sheet? From what I understand the interest can offset profits, but will the loan balance remain indefinitely unless you decide to reduce it?
And is the usual way of buying a business to get a business loan for the business or a personal loan? What are the differences and pros/cons of each?
And is the usual way of buying a business to get a business loan for the business or a personal loan? What are the differences and pros/cons of each?
Seany88 said:
On a related note, how does a business loan appear on the balance sheet? From what I understand the interest can offset profits, but will the loan balance remain indefinitely unless you decide to reduce it?
And is the usual way of buying a business to get a business loan for the business or a personal loan? What are the differences and pros/cons of each?
Surely as the balance reduces, you then translate that decreasing figure to the balance sheet? Why would you show something that you'd paid off? And is the usual way of buying a business to get a business loan for the business or a personal loan? What are the differences and pros/cons of each?
It depends really if you are trying to 'shrink the business' for obvious purposes, or if you are building value into your company you will look to demonstrate as healthy a balance sheet as possible I suppose.
If you're a sole trader, a business loan works in exactly the same way as a personal loan anyway, except they will use different methods of scoring your loan application. Ie: The manager will still assess your ability to repay the loan, and how you percieve your business to run in the initial period after the loan. That's why you have to present buisness plans, cashflow forecasts and all that malarkey to a bank when you want a business loan.
There's nothing to stop you getting a low interest rate personal loan before leaving employment then magically 'have the start up capital'
I did it to get my first couple of cars. I'm sure it's not entirely proper advice on my part but it must be a grey area as where do you draw the line on a loan application?
Nicola if its for a small amout of money try The Princes Trust . Also speak to your local Business Link as they will be able to advise you of alternate funding options and grants.
Thankyou for all your advice, I have very little capital myself which I need to build up, though my business is slowly getting busier
I also do Nails and jewellery parties which is the money I'm saving to put more capital into my actual business.
Now realised I can actually save enough over 2/3 years to be in the same position with no repayments to make so I'm going to go down that route as a first port of call.
I also do Nails and jewellery parties which is the money I'm saving to put more capital into my actual business.
Now realised I can actually save enough over 2/3 years to be in the same position with no repayments to make so I'm going to go down that route as a first port of call.
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