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12 Tips for Successfully Securing a Business Loan

01 November 2022

Securing a business loan is a great way of quickly raising essential capital for your company. However, before even beginning the application process there are some critical things you need to consider to ensure your best chance with lenders. By working through our top tips, you will greatly increase your chances to successfully secure funding for your business.

Get Your Existing Finances in Tip-top Shape

Ensure your accounts are accurate and up to date

Your top priority before applying should be to review and optimise the financial health of your organisation. Your accounts should be accurate, up to date, and easy to understand in order to present a very clear story and make a good impression.

Here are some of the things you are going to be expected to show:

  • Up to date management accounts (Profit & Loss and Balance Sheet)
  • Latest accounts to show strong turnover and healthy profits
  • Business/project plans
  • Any other bank accounts tied to your business
  • Good credit with benefit your application significantly

Being prepared with the right information will not only make the process simpler and quicker, but also show you’re organised and work efficiently.

Minimise any outstanding debts

It’s worth spending some time to minimise any outstanding debts and chase debtors as this helps to show you are organised and pro-actively managing your finances. You may also find that by doing some, not only does your cash flow improve, but you may even find (if you have a lot of debtors) that you no longer need to borrow as much as you thought which can make it even easier to secure finance, plus you’ll pay less in the long run due to less interest.

Review all auto-renewing payments

When running a business it can be really easy to miss things such as potential cost reduction opportunities where auto-renewals are concerned. For example, perhaps you have a sales team and each has their own phone. Your original phone contract was for 20 staff but for the last year you’ve only needed 15. As a result you could be overpaying for 5 phones that you no longer need.

Similarly, is that particular phone contract still providing you with the best deal? Often you’ll start with a highly discounted rate that will expire after a certain period of time. You may even discover you’re paying for something you no longer require.

If you haven’t reviewed your regular outgoings for a few years, it would be worthwhile having a quick review to see if any potential cost reductions can be made.

Review any financial agreements which are coming to an end

If your business currently already has any kind of financial commitments it can be worthwhile reviewing whether you can postpone your application until that financial obligation has been fulfilled. Not only will this reduce the overall debt on your balance sheet, it will also make things simpler in terms of creditors for the business and potentially, who has priority in terms of any financial charge over an asset.

Consider What You Can Offer As Security

Lenders are often by their very nature, risk averse. Therefore, it would be beneficial to consider what you can offer banks in terms of security or as a personal guarantee to minimise the financial risk for the lender. Do you have any valuable assets that you could offer up as collateral? For example:

  • Machinery
  • Plant
  • Vehicles
  • Tangible Equipment

This indicates that you’re taking responsibility for your business loan and have a means to pay it back in some way, even if your organisation is unable to make the payments agreed in the contract.

Check Your Business and Personal Credit Scores

Not only should you be checking your businesses credit score, but as a business owner you should also be checking your personal credit score.

Poor or bad credit history could:

  • limit how much you’re able to apply for
  • limit or determine which funding options are available for you
  • prevent you from securing a loan entirely

As a result, it is best to check each of these early in the process so that you don’t waste time and can tailor your application accordingly. There are various websites available online where you can check your personal business score, and the credit score of your business such as:

Business Credit Score Companies:

Personal Credit Score Companies:

We highly recommend using Check My File. They are very good at collecting information from the main credit reference agencies such as:

Create or Update Your Business Plan

Having a concise and well thought out business plan will increase your chances for being approved for a loan and this documentation is often not a requirement for lending firms, but can benefit your application.

A business plan will also help focus your attention onto what you want to achieve through your business, what areas need improving and how much you need to borrow to meet these targets.

A business plan must be thorough and aim to cover the following information:

  • Executive Summary
  • Business description
  • Products & Services
  • Market research Competitor analysis
  • Strategy and implementation
  • Internal operation (including IT structure & employees)
  • Financial forecasts for next 3 years

If you can get this right, you stand a better chance at convincing a lender that you’re an ideal candidate for a business loan.

Demonstrate Knowledge and Expertise

Lenders want to know that any business worth their weight in gold knows the ins and outs of it, including what is happening internally and externally in the industry.

Creating a SWOT analysis is a strategic planning and management technique used to help a business identify their strengths and weaknesses as well as outline potential business opportunities for growth and threats in relation to competition or project planning.

This helps present to lending firms that you’re aware of any issues related to the business and have considered plans to mitigate risks for both yourself and them as the lender.

Apply for the Most Suitable Type of Finance

Not all types of finance are created equal. Some are general packages designed to suit the needs of most businesses without being too specific about what the money can be used for. Others are packages which are specifically created to meet a specific need. Whilst it may seem obvious in some cases, inadvertendly applying for the wrong type of finance when a better solution exists could result in an application being rejected.

For example, applying for a "standard" loan (typically over 3 to 10 years) when a short term business loan (typically up to 3 years) would be better suited - finance companies base their interest rates on a number of factors including typical repayment periods, so whilst you may think it would be appealing for a lender to loan you money for a shorter timeframe, the opposite is true as the loan interest generated is lower. That's why short term loans often have slightly higher interest rates to loans over a longer duration.

Check the Eligibility Requirements

Before applying or setting your heart on a particular financing option, make sure you carefully review and understand the eligibility requirements. It can be so frustrating preparing an application only to get rejected because you weren’t eligible from the outset.

Thankfully, many lending firms have eligibility checkers on their websites that can pre-qualify you without the need for a credit check.

Some typical criteria for business loan firms is:

  • Age - You must be at least 18 years old
  • Creditworthiness
  • Affordability
  • Business eligibility
  • Right to operate within the UK

Do your research as requirements vary from lender to lender and some may still consider accepting those with different challenges. Some lenders specialise in loaning to start-ups whereas some will require you to have at least 3 years trading history, it really can vary and so this is where speaking with a business finance expert can help.

Ensure All Communication is Honest, Timely and Professional

Being efficient works in both parties favour as coming prepared and presenting documentation in an organised manner speeds up the lending process.

It’s crucial for everybody involved that you’re completely honest about your circumstances and intent as this reduces any potential risks down the road.

Don’t stretch yourself financially

There’s a common saying that businesses often fail due to borrowing too much money, or too little. As with goldilocks, the secret is calculating the amount to borrow that’s “just right” for your business.

Be sure not to overstretch yourself financially, and apply only for what you think you need in order to reach your goals, whilst also realistically being able to pay back in frequent instalments without struggling. If a lender feels you’re being overly ambitious, they might not accept the loan.

Get help securing the right business finance solution for you

Here at Union Business Finance we intend to make a huge difference in the financial world and build strong, long-lasting relationships with our clients. With access to a significant portfolio of finance and loan options from over 100+ lenders and experience of helping clients across a range of industries, we are able to identify the best solution for your business needs.

Our team of professionals strive to simplify finance and take some of the stress off you so that you can focus on running your business. If you want to find out more about how we can help you with a business loan, give us a call so we can help propel you forwards today.

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Aintu Ltd T/A Union Business Finance is an independent Asset finance broker not a lender, as such we can introduce you to a wide range of finance providers depending on your requirements and circumstances. We are not independent financial advisors and so are unable to provide you with independent financial advice. Aintu Ltd T/A Union Business Finance will receive payment(s) or other benefit from the finance provider if you decide to enter into an agreement with them. Aintu Ltd T/A Union Business Finance is an appointed representative of AFS Compliance Ltd which is authorised and regulated by the Financial Conduct Authority under number 625035. Aintu Ltd T/A Union Business Finance aims to provide our customers with the highest standards of service. If our service fails to meet your requirements and you would like to report a complaint; please click on the link below;


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