A good business plan is the surest way of even getting your application through the lower level management of a bank. Whilst the people who often review your business plan are not the ones who approve it, their opinion actually does count in the vetting process. Your business plan must sound convincing and not confusing.
- Have a good relationship with your bankers – No matter how innovative your business is or how sound its prospects are it often isn’t enough fora bank to grant you a loan. This is because just as you do not have a crystal ball to confirm to you if your business will pay so do your bankers. However, it often takes an influential banker to get you through the rigors of convincing several panels of people waiting in line to scrutinize your request. The higher the person you know within the leadership of the bank, the more plausible your request will be granted.
- Have a good business plan – A good business plan is the surest way of even getting your application through the lower level management of a bank. Whilst the people who often review your business plan are not the ones who approve it, their opinion actually does count in the vetting process. Your business plan must sound convincing and not confusing. Most people often load business plans/proposals with boring semantics and convoluting technicalities that even the authors themselves do not understand. Your business plan must read like a bestseller simple enough to get the plot and intriguing enough to make the reviewer want to have more. Slides, bullet points, SWOT analysis, financial projections are sure bets which you should include.
- Have an irresistible collateral – Banks love collaterals and guard them jealously when they possess it. It is the crown jewel of any facility (loan) that they grant. As such the better your collateral the more likely you are to get a loan request granted. By the way, possessing a landed asset or property is not enough to sway the bank. The quality of the property is really key. You cannot have a mansion in your village that has no method of estimating its value and expect a bank to rely on that as a quality collateral. The key therefore is to have collaterals (assets or otherwise) that have marketable value that can easily be determined
- Have a track record of repaying loans – For those who may wonder…”but I have never taken a bank loan before?” You may have to look at your history of repaying debts. Debts could be those owed to your suppliers, the tax authorities or service providers. Banks can still use this to measure your credit worthiness and ability to repay loans when due. As such, it is to your advantage that you build a track record of credit worthiness by showing that you can repay your loans (whether to the banks or in the course of running your business) as and when due. This will boost your credit rating and your chances of securing a bank loan
- Show that you have a biz that can generate high cash turnover – Just the same way banks like collateral they also love businesses that generate a high turnover. That is why business such as trading, oil and gas are more likely to be funded by a bank. These businesses generate huge streams of cash flows that the banks can easily identify and leverage on to get their money back. If you can demonstrate that your business can generate a high debt service coverage ratio (generate enough cash that is higher than debt obligations) you are very likely to get a loan approved. In fact, some banks are ready to double down on collateral if they see that your business generates a very high cash turnover. That is just the power cash can wield when it comes to seeking a bank loan.
Whilst these tips cannot guarantee you get a bank loan, it does help brings you closer to obtaining a bank loan.