Don’t ask for more than you need
Banks use a variety of formulas to work out how much they think you can afford to borrow. So, don’t not ask for more than you need. But equally, it’s important not to underestimate what you need.
Don’t rush it
Each bank will have different approval processes. Provide all the information required upfront so they have a good understanding of why you need the loan.
You are certainly entitled to ask how long the process might take but avoid placing any pressure on the bank to respond in your time frame, as this will not hasten the process.
Other common mistakes
- Thinking that business turnover is the same as cash received from customers. Banks look at both net profits and cashflows
- Not providing information about the directors of the business. Banks will assess directors and may ask for guarantees from them
- Providing security that is in excess to loan value – this leaves less room to provide security on other loans if required
- Not including loan amounts to other financiers
- Including details of loan repayments and not factoring these into cashflow forecasts
- Inflating the value of business assets. Bank valuations assess standard market value for a quick sale
- Therefore, many small businesses unintentionally overstate the true market value of their assets.