5 Tips For A Successful Business Loan Application

Whether in the context of the operation of an existing business or for a creation, entrepreneurs must sometimes request a professional loan. The stakes linked to this request can be significant, which does not facilitate the process.

Indeed, the quality of the file and the interview with the banker will influence the chances of success but will also offer more or less latitude to be able to negotiate the conditions for obtaining the professional loan.

The manager's blog offers you some advice to maximize your chances of obtaining a quality business loan.

Business Loan Application Tips

1 – SUBMIT A CLEAR AND STRUCTURED LOAN APPLICATION FILE

1 - Submit a clear and structured loan application fileIn the majority of cases, the banker to whom you submit your loan application will not decide whether or not to grant it to you. He will read your file, listen to your presentation and defend your file before a loan allocation committee. You must therefore build your file accordingly.

Most of the time the file that will be presented to the loan allocation committee will be composed of two parts, a part formalized by the bank which will be completed by your bank adviser and a free part which corresponds to the file that you will have left to your adviser. and that he will have almond.

A – Identify the information needed for the loan application

To facilitate the work of your bank adviser, you can start by contacting him and asking him for the elements he needs for his internal file. This will put him in a good mood while giving you an image of rigor (which will be important for the involvement he will put in defending your file with the commitment committee) and will help you identify the elements that come into play. for granting the loan.

B – Submit a clear and structured loan application file

To be able to defend your file, your interlocutor must understand it and take ownership of it. During your presentation interview, give him a qualitative and synthetic file (neat, clear and structured). This will allow him to assimilate your project, his motivation to defend your professional loan application is one of the keys to a positive response.

He will probably have little time to present your project internally, make it easy for him.

Note: In the digital age, remember to prepare and provide a paper file and a digital medium that will allow the advisor to make a clear and concise presentation to the committee.

C – Work on the quality of your oral presentation

Banks seek to reduce the risks associated with loan repayments. Your goal is to reassure your banker about the quality of your project and to convince him that the full repayment of the loan will not be a problem.

So be clear and get to the point without dwelling on the details. Make a global and synthetic presentation that you will have taken care to prepare. Highlight your strengths and prospects, taking care to support them with a few concrete elements (figures, market research, customer feedback, etc.). The more your presentation is simple, clear and complete, the more your interlocutor will be able to reproduce it in front of the committee.

In the end, your interlocutor must have retained 5 essential elements of the project:

• It responds to a real and quantified customer request
• It is technically feasible within the given time frame
• It is viable and profitable
• It is carried by a competent team
• The development plan has been well prepared (forecast, action plan, planned resources, etc.)

It is only then that your adviser will question you on the points that seem essential to him. If your initial interview has been properly carried out, it will have allowed you to anticipate some of these questions, to prepare for them and to insert the answers in the written (and digital) document that you will leave with him.

Note: doing a SWOT will allow you to present the opportunities you intend to seize.

It will be necessary to present (and master) the following points:

Your business activity:

1. The target market (target clientele, market size, segmentation, etc.)
2. The products and services marketed (characteristics, advantages, disadvantages, prospects, etc.)
3. Distribution methods and channels
4. Breakdown of activity by market and product
5. Competition (direct, indirect, etc.)
6. The development strategy

Resources available

1. Presentation of the management team (who decides, how, skills,)
2. The material, technical and human resources available,
3. The strengths of the company
4. How will any missing resources be acquired?

The costed development plan

1. A solid forecast including forecast turnover, expected profitability, ROI
2. A 1, 3 and 5 year cash flow plan
3. The financing need of the project and the financing plan

Tracking tools

2 – PRESENT A SOLID FINANCIAL STRUCTURE

The plan and the financial structure of the project are of paramount importance. The involvement of the company or the project leader is also of great importance. Most often, banking institutions ask the entrepreneur for a minimum financial commitment of 30% of the total financing requirement as well as guarantees to cover a significant part of the amount of the professional credit requested.

The significant investment rate of the company or the project leader in the financing of the project will facilitate the decision-making of the loan allocation committee.

After understanding the nature of your project and measuring the financial envelope you need to set up your project, the bank advisor will study the financial quality of your project.

To do this, he will study the financial structure of the forecast that you will have provided him with and will endeavor to understand:

• How was the amount of the professional loan established? Is the amount justified?
• What is the distribution of financing (and therefore of risk)? What does professional credit represent in overall financing? How much financing does the company take on? Are there other investors?
• Is the operation financially reasonable for the company? What does the study of financial ratios give (financial independence, evolution of self-financing capacity, BFR, etc.)?
• What will be used to finance the professional loan (assets, cash, etc.)?
• What guarantees can be provided in return? Are they solid? Can other organizations cover part of the risk ( BPI, etc.)?

Note: Banks often ask partners to block their current accounts for the duration of the loan in order to prevent it from being used for their repayment.

Note: Bankers will also study the accounts of previous years of existing companies. They make it possible to judge the quality and skills of their interlocutor. In some cases, it may be useful to provide explanatory notes.

Note: Avoid underestimating the cash requirements, they will inevitably attract the attention of the award committee during the analysis of the file.

3 – PRESENT A GOOD QUALITY BUSINESS PLAN

The business plan, or business plan, is an excellent communication tool, it serves to arouse the interest of the reader, arouse his interest and lead him to wish to participate. He usually presents the project in 3 parts:

1. The target market and the economic potential of the project. This part includes the market study (size, segmentation, competition, evolution, etc.) as well as the description of the product or service marketed. It aims to highlight the potential of the project and its commercial feasibility.
2. The team and the structure that will carry the project. A partner relies above all on the person or the team who will lead the project. It is therefore essential to introduce the team and reassure the reader as to its ability to lead the project and ensure its technical implementation, financing and marketing. It will also be necessary to present the legal structure of the project (legal form
3. The financing of the project. This third part includes a financial forecast (projected balance sheet, projected income statement, projected cash flow plan, financing plan, etc.

It is well understood, the forecast is a whole, if the financial part must be perfect, it is both the relevance of each part and the homogeneity of the whole that will make it a tool for presenting and selling the project. Taking the time to make a quality business plan is a process that can pay off big!

Note: Your advisor will also judge your loan request on the amount of the professional loan requested. Managing to find the right financing, neither too much nor too little, helps to guarantee the quality of the file, the professionalism of the project leader and his entrepreneurial capacity.

Note: Avoid exaggerating the numbers in your business plan. Each element must be justifiable, including activity forecasts which can be calculated in several ways. A realistic presentation highlights the maturity of the entrepreneur and is more convincing, especially with financial advisers who are used to studying credit application files.

4 – CHOOSE THE RIGHT ESTABLISHMENT AND THE RIGHT TIME

Banks are above all commercial companies, they have objectives and must also comply with regulatory outstanding levels. 

While they are generally on the lookout for entrepreneurs who set up their company in order to find new customers, they may be more attentive when the customer is acquired or when their business loan objectives have been reached or are about to be reached.

Thus, it may be interesting to find out about the objectives of the different banking establishments, particularly in terms of business loans, and to adapt your research accordingly. 

In addition, institutions are more or less receptive to credit requests depending on criteria such as the size of the company, the sector of activity or the nature of the credit. Going to the right institutions can make it easier to get your loan.

Finally, obtaining a business loan is often the way to attract new interesting customers and/or to sell complementary financial products.

5 – FINANCE ASSETS AND NOT WORKING CAPITAL

Banking establishments prefer to finance assets on which they can take a guarantee than WCR or a cash requirement. Adapting your professional loan application accordingly facilitates the acceptance of the file.

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