In today’s economic climate it’s not uncommon to feel that you’ve got to hunker down financially to weather out the economic storm. That being said, being vigilant with your business doesn’t mean that you should isolate yourself from your business bank.
Loans are an integral part of a functioning business, so keeping on top of what you can get is all the more important. Below, we look at some common business myths which may be holding you back that we’re determined to debunk.
“No bank will lend money these days”
It’s true that business lenders have been rather slow to recover from the economic recession and business lending on a whole seems to be in limbo. However, every business loan is different and approvals are based on a case by case basis. There’s no reason why you should worry. Armed with a robust business plan and an understanding of your business, don’t give up without first trying. In fact, with the wealth of good business advice available online and from your local bank, you’re more equipped than ever before for a meeting with your bank’s business loan manager.
“I only need a little cash, it’s not worth asking” or “my business is too small/not enough turnover to be worthwhile for the bank”
Borrowing at a favourable rate has become more difficult for low value loans over the last half century. However, a traditional loan isn’t necessarily the best way to help your business. Business owners caught in the middle of lending schemes, requiring more cash than they had but not being worth it for the banks tended to suffer.
Not anymore. Overdraft facilities are there for your business to take advantage of. You don’t need to take out a cash advance; the ability to dip into an overdraft, regularly, or irregularly depending on your business needs is easier than ever before. Simply speak to your local business banking advisor on how an overdraft facility will help your business grow. If you haven’t already got a business bank account – get one! Advisors often come as part of the package; they could have debunked this myth for you!
With no minimum and medium to large maximum overdraft limits depending on the requirements of your business, you’re missing out if you’re not already taking advantage of attractive rates, especially for start-ups.
“There are too many hoops to jump through to secure a loan”
Securing a business loan is as easy as understanding your business and demonstrating it to your banking loan advisor. There’s a plethora of guides online on how to write a coherent and robust business plan which can help put your business on paper in a language your advisor will understand – in black and white (or red).
Simply plotting out what your vision is, why you need the loan, how you’ll spend it plus how you’ll repay will usually be enough to bowl over any bank. Understanding your business is the key. Know what you need and what you need to do to get it on the right track.
“Decisions take months”
If the last time you applied for a business loan was 1989 or are only getting advice from the oldest member of your office, you may think it’ll be weeks or months before a loan is agreed and paid into your account. The bank loan industry has come along leaps and bounds since those days where turning up at the bank with several briefcases full of paperwork.
Today, most businesses can apply for a loan in under 60 minutes online! Payments can be completed in a couple of days if all necessary information is provided. However, if your bank required additional business information from you, such as your past balance sheets or previous statements there may be a longer waiting period. Again, this can be minimized by having all the required data ready in advance and doing your homework. There’s not that much, honest!
“I don’t want to put my personal assets at risk”
It’s a very good idea to reduce any risk with the worst case scenario by creating a legal separation between your business and your personal finances, often in the form of forming a Limited Company.
By setting your business up as a limited company then, by legal definition you will only have ‘limited liability’ – normally up to the level of the nominal value of any shares in the business.
If your you do have a low or non-existent credit rating you may be required to submit personal properties
“If I’m rejected I’ll have damaged my credit rating”
If you are turned down for a loan it will not affect your credit rating. Furthermore, every bank is different and has a unique set of loan parameters which must be met. Just because you may have been turned down for one loan by one bank doesn’t mean that you’re doomed to be without credit forever.
Additionally, don’t think that asking for a lower amount will change a bank’s mind. Usually bank managers’ hands are tied – it all comes down to the numbers. Find a bank that suits your business needs and has an advisor who can help, somewhere that will offer more than capital, but experience and advice.
“I don’t have a credit history” or “I have a poor credit history”
How do you think start-up businesses get their loans? Magic? As previously mentioned, every bank is different and works on a unique set of loan criteria. Specialist start-up loans exist for a reason too, once the money is loaned, your bank wants you to succeed and they’ll bend over backwards to make that happen, working with you to determine the best repayment schedule and amount.
Remember to shop around to find the right bank for you, loans come in all shapes and sizes, so speaking to an experienced advisor who can get to grips with your business will be the best option. With up to 75 per cent of small business owners admitting that they don’t know all of their financing options, getting the right advice is crucial. Reading an online guide will only go so far –pick up the phone and speak to your local bank’s business advisor.