Discover the most frequently asked Business banking questions
How to apply for a business loan?
Business owners or business directors often feel much stress when they are considering to apply for a business loan. Sometimes they are worried about all the paperwork which will need to be provided in order for the application to be processed, sometimes they are worried about how long it will take for the application to be processes, sometimes they are just frightened by the very idea of their application to be simply rejected.
And it must be said that sometimes, they are rightfully worried - yes, it may take a lot of paperwork, yes, it may take a long time, yes, they may be rejected. However, carefully planning a strategy to apply for a business loan can make things much easier.
The first question which business owners or director should ask himself when considering to apply for a business loan is whether the loan is really needed. Other options like bank overdraft or personal loan might be preferable, and sufficient to cover needs.
When the decision is made to apply for a business loan, the following steps should be observed:
- drafting a complete business plan with detailed information on to how much money you need, how this money will be used and for what purpose, how much revenue is going to be generated and at what pace, and how the business is going to pay the bank back, how much per month;
- doing an elaborate market research to tell the lender what are the exact prospects on the market, and how revenue estimates can be credible.
Aspects of the business loan terms should be carefully reviewed, such as:
- total cost of the loan, with all interests, all charges and all fees, including loan protection insurance fees and filing fees;
- late payment charges can be high, and more generally how late payment arrangements work;
- redemption penalties;
- what happens if the loan needs to be renegotiated, for a longer repayment period or if further funds are needed.