Understand the Lending Process to Secure Success for Your SME

If you own, or are looking to set up, as an SME you should be applauded. SME’s account for much of the country’s growth, and are strong drivers for employment in local areas. However over recent years, owners of SMEs have felt persecuted by the banks, with many failing to secure those vital loans they need for start-up or expansion.

While it’s true that banks were very tight in the years following the financial crisis in 2008, they have started to loosen the purse strings a little. But the game has certainly changed, and the easy come easy go approach by banks is a thing of the past. Now they’ll be more careful with their loans.

sme lending stages
Follow the right lending stages for faster business loan approval – photo credit: www.LendingMemo.com

Although many business owners see the bank as the bogeyman in this scenario, the majority of chartered accountants in London report that the main issue is that small business owners don’t have a proper grasp of the lending process, with the main reason for a declined loan being inadequate preparation.

When it comes down to securing a business loan there are 3 essential stages to the application process, and as long as you prepare for each and pass them then you should see approval from the bank in short order.

Make sure that you are prepared to give a passionate and enthusiastic sales pitch. You need to demonstrate that you believe in your business if you expect other people to. If the response to a well-prepared pitch is negative it’s more than likely that the lender sees some basic flaws in your business that perhaps you’ve overlooked, or are ignoring.

The next stage is to demonstrate that you are financially committed to your business, as well as emotionally. Banks will respond positively to someone who has invested cash into their business already. This simple act proves your belief in your business more than mere words can. You don’t need to have re-mortgaged your house, but the amount should be significant in proportion to your personal financial situation. If you’re not prepared to invest in your own business, ask yourself why the bank should, given that their business is making money.

Now the nitty-gritty. It’s absolutely vital that you have prepared as thorough and realistic a business plan as possible. Don’t fall into the trap of predicting a doubling in growth each year, instead be cautious and conservative but also ensure that your projections lean to the optimistic too. Allow for a reasonable shortfall and be sure to highlight possible problems that you feel the business could run into and exactly how you will be prepared to tackle them.

It’s really important to impress the contact you have at the bank. They will be able to sign off loans to a certain amount, but anything over that has to be cleared by committee, and the committee will make their decisions based largely on the feedback from your personal adviser.

The best way to be prepared and ready to secure that loan is to work with HW Fisher chartered accountants in London who can assist you in putting together that winning plan.

About the Author: This article is written by Jason Tucker