UK Bill Help

In the UK businesses can apply for financing from commercial or personal banks. The process for qualifying for a loan for your small business is fairly uniform from one bank to another. Find more details on the process below.

Small Business Loan Application Process

When applying for any type of financing, including a loan, preparation is always key. You should be prepared to provide details on your complete financial situation, including but not limited to your personal life as well as your business. This can include summaries of your total household income, savings, assets, and more. Most lenders will also require significant information on the business as well, such as total income and expenses.

1. Complete the application: You will need to provide a fully completed loan application. While this may seem elementary, many requests are delayed due to incomplete details. Your successful completion of the application for your loan also demonstrates your attention to detail, which will be an indication of how you run your business.
2. Supply a Business Plan: Show the underwriters how you intend to profit from your venture. You will need to define the products or services offered by your company. Who is your target customer? How will you promote your business? A successful plan will include advertising costs and marketing strategies. If you already have promotional materials, they should be included for reference. A business plan will also include pricing strategies and margin expectations. Realistic estimates will be similar to those of already successful competitors that you will be compared to.
3. Document your Finances: Lenders generally want to see the total financial assets and cash flows of a business prior to granting additional capital. Have you invested any cash or supplies into the operation that you are personally on the hook for? Do you have personal assets that you can draw on to pay your own living costs while you build up your business? Lenders need to see that you can run the company for many months without the need to draw a regular salary before it is profitable.
4. Prepare for a Credit Check: Lenders may require a credit check for both the business and owners. They are looking for signs of responsibility or financial weakness. Know that your own personal credit challenges could restrict the amount of capital that you can borrow for your business. Interest costs can also vary. Banks and lenders know that insolvent businesses can easily shut down allowing the owners to move on to another venture. As a result, lenders will frequently require owners to qualify on behalf of the company. Unless the business has its own established credit rating, the lending decision will be made largely based on your own credit scores.
5. Court your Lenders: Be courteous and professional in all communications. Wear proper attire for in-person meetings. Make sure that your online reputation (Facebook, LinkedIn) is proper and free from any questionable content or images. You must exude an image of success. Underwriters may have discretion in approving certain aspects about your loan application. As a result, make sure that they want to approve your request. Whereas some underwriters may offer a cursory denial, others may send the application back to be amended or allow you more time to provide documentation.

Choosing a Lender

Selecting a bank or some other financial company to borrow the money from can be just as important as completing the application itself. Some lenders have a very arduous application process that can take weeks for approval. Others offer a more streamlined approach that gives you access to the capital you need when you need it.

Another factor to consider is the location. Lenders that offer UK financing products may be located nearby, or they may be global finance corporations that provide business capital to national and international firms. For example, the nonprofit lender Foundation East loans money to small businesses in Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk. It helps to work with a lender with a local presence, especially if there is an office where you can visit in person.

A lender’s reputation is also very important. Finding a partner that will be adaptable to the needs of your business will be critical. This is even more true if you encounter challenges to operating the company, such as drop in sales or fluctuations in the prices of materials used in the course of your business.

See how the bank, and the terms they offer, relates in comparison to others. You can compare interest rates and other conditions. You should also review complaints on the lender to look for negative trends. Every bank will have received some complaints. What you are looking for is an unusual pattern of complaints that reveals deeper problems within the lender that you would like to avoid.

When conducting a search for a small business lender, sometimes the first stop is your own bank. Many banks offer commercial loans in addition to consumer lending products. If you have been a customer for many years, your loyalty can be taken into account as a part of the underwriting process. They can review how you have managed your deposit accounts, which is a detail normally not included in your credit rating.

Your established banking relationship can provide additional street credit to your request. Applying through your bank and at least one other can help you compare competing offers to determine the best terms that you can obtain. You will save quite a bit of coin with a lower interest rate. It is also possible that one lender will approve a higher loan amount, so it helps to shop around for the best deal.

Another option to consider are government funds that can provide a business access to the financing they need. The programmes will generally be limited in scope and are only available for a period of time, but when they operate, they can be a source of low interest loans for a new or existing business. One example is the Invest Northern Ireland Small Business Loan Fund.

When preparing to start or expand a venture in the UK small business loans can help you buy the equipment or inventories you need as well as to cover capital costs or rent. Successful entrepreneurs limit the amount of cash that they must borrow, but they do obtain financing when they believe it will help them boost their results and hit higher levels of profitability.

In situations where you have credit challenges or an unproven business track record, there may be other microfinance options that can be a possible fit. While they will come with pros and cons, these can be reasonable options, especially if you are unable to gain approval through traditional UK small business lenders. Whatever source of financing you choose for your business, whether it is a loan or not, always be prepared to leverage your funding to accomplish your goals.

PFNI was launched in 2002 after receiving two small business loans totalling £45,000. As the company continued to expand, we then explored other financing options. As a result of that, we paid those off months later after receiving a second round of funding with a single £90,000 unsecured loan. That funding provided us with the capital we needed to purchase equipment, hire staff and pay marketing costs. After well over a decade, we have never looked back. What will your loan allow you to accomplish?