Secure bank loans by investing in your own business

To secure bank loans, there are a number of things you can do to improve your chances.

By: Hitesh Khan/

Here are six of the most important guides to help you secure bank loans:

1. Have a sound business plan to secure bank loans.

Having a solid business plan is your best shot at getting a loan. But it also must be a complete and well-presented plan. It is especially important to polish your executive summary. This one- to three-page summary of your business is what bankers look at first — if they like what they see, they might read on.

2. Make sure your documentations are sound to secure bank loans.

The documents required will be determined by the type and amount of credit you need. It may be as simple as a single-page application for a business credit card, or it may require business and personal tax returns, and financial statements.

It is good to understand the legal jargon in that stack of papers you will have to sign before the small business loan is disbursed. A close look at those documents now could save you a lot of headaches later. Be mindful that your bargaining power over your small business loan vanishes completely after you’ve signed the documents.

The small business loan documents could be a bit overwhelming, but with the help of a lawyer of an independent loan specialist, you can get a full understanding of what the legalese means. In fact, many independent loan specialist encourage loan applicants to understand the loan documents before they even complete a formal application for a loan.

Generally, it’s a good idea to get the loan documents ahead of time so you have a chance to review them for a couple of days before applying for a business loan. Most lenders won’t have a problem sending advance copies of the documents, but they will generally only do so if they’re specifically asked.

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3. If you intend to secure bank loans, you need to invest your own money.

Another way to improve your chances of getting a loan is to put some of your own money on the line. Lenders typically like to see that owners have at least a 25 per cent equity stake in the businesses they finance.

4. To increase your chances to secure bank loans, rent, don’t buy.

Bankers also favor businesses that plan to rent rather than purchase a building. That’s because lenders prefer that you invest in assets that generate income, like inventory and equipment. Bankers also frown on high renovation costs.

5. Check out your credit report, for it is the most important factor to secure bank loans.

Reviewing your own credit report before you start the application process can also put you ahead of the game. Lenders use your personal credit history to help them decide whether you’re a good risk for a loan, so it pays to know what they will find. If your report shows a mistake, contact the credit reporting agency and demand a correction.

If your credit report shows legitimate late payments or bankruptcies, you should include a letter with your application explaining the circumstances and how they have changed. This can soften the impact of these black marks against you. Always be honest about your credit history — covering up problems is the fastest way to get shown the door.

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6. Explore smaller banks and non-traditional lenders to secure bank loans.

Don’t assume the bigger the bank, the better your chances of getting a loan. Smaller banks might be more inclined to finance start-up and entrepreneurs, and their loan officers are more likely to give you individual attention.

In order to secure bank loans, you should always think long term. Along with your company secretary your lender should become one of your trusted advisers. The relationship should not end once you have gotten your loan. As your business grows and your needs change, you should allow your lender to provide recommendations on other services, such as additional credit, cash management, merchant services, and retirement and succession planning.

Also, there are many loans in the market for small business owners and not all products may be the best fit for your business. What’s worse is, taking an unsuitable loan could be a huge setback to you personally, as well as to your business. So, an important factor is, work with your lender to determine the type of loan that fits your needs.

How to Secure Small Business Loan Quickly

Before applying for a business loan, talk to the loan consultants at iCompareLoan. We can set you up on a path that can get you a it in a quick and seamless manner. Our loan consultants have close links with the best lenders in town and can help you compare various loans and settle for a package that best suits your needs. Find out money saving tips here.

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To find out more about Peer to peer lending versus that of SME loans so as to make an informed decision: SME Loans or Peer-to-peer (P2P) Lending – What is the difference?

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