One of the questions I am asked the most is “Do you think my finance application will be accepted?”
As positive and as honest as I am, I can never give a cast iron guarantee and say yes. However, with over 20 years’ experience in asset finance, I can tell you that there are a five fundamentals that you can do that will certainly improve your chances of being approved for business finance.
Why do you want to borrow the money? A clear and well thought rationale for your application is key. For example, if you are looking to consolidate existing agreements into a more affordable option, what positive effect does that have on cash flow? Alternatively, if the asset you wish to buy is income generating, demonstrate how that the income will outweigh the monthly payment. Or, if re-financing existing assets to raise working capital, how will that cash injection positively change your business?
2. Management Accounts
Lenders will want to see the most up to date financials for any business they deal with. If your accounts are more than 12 months old, supplying management accounts will show the lender how invested you are in running your business efficiently.
These days, you can link accountancy software products to your business account, enabling you to download a real time profit and loss and balance sheet in seconds. A great investment for your business for not very much outlay and may be the difference in your application being approved.
3. Bank Statements
Try to stay within your overdraft and avoid returned and unpaid items. An underwriter is looking for a business to show affordability and assurances their loan will be repaid. Bank statements offer a great insight into how a business manages it’s cashflow and a well-managed bank account may be the difference between an offer or a decline.
4. Cash flow forecast
Businesses should keep a cashflow forecast as a matter of course. As well as allowing you to manage the company’s finances, they can also allow you to spot any cashflow issues well before the cash begins to run out. This can be hugely beneficial, especially when applying for a larger facility, as it allows you to demonstrate to an underwriter exactly where the money will be going and how it will improve the business’ position.
5. Full disclosure
Nothing will alert an underwriter more than any adverse information that hasn’t been disclosed at the point of application. Be completely honest if there are any credit issues with either the director(s) or the business. Explain what the issues are and, most importantly, how you are trying to rectify them. For finance brokers like myself, full disclosure will determine which lender I apply to. Certain lenders will fund clients with adverse, however, other lenders such as banks will be reluctant to do so.
Follow these tips and you will be well on your way to securing the finance you need for your growth and expansion.
If you would like to discuss how Liquid Corporate Finance can help fund your business, contact us via the details below:
0333 772 1782