I want to apply for business finance. What information will I need?

More and more businesses are looking to business loans to ease working capital, or to purchase assets amongst various other reasons. When we are approached by businesses looking for funding of any kind, we’re often asked what information they will need to provide. Below we set out what information lenders are likely to ask for;

Loan Purpose

This might sound obvious but it’s surprising how many businesses apply for funding but don’t have a clear explanation of what the funds are for. Be clear in your request, explaining how much you need, how long you need to repay, what the funds will be used for and how it will benefit your business. Remember, it’s a loan that has to be repaid so there’s no point borrowing more than you need and paying more interest and fees.

Business bank statements

Lenders will want to review Business bank statements to understand the income and the expenditure of your company. They will be looking to see that the company can operate their bank accounts within the agreed parameters so ideally with no unauthorised overdraft usage or returned payments. In most cases, lenders will only require the last 3 months bank statements although some may require 6 months.

Financial accounts

Financial accounts are necessary for the lender to understand the financial performance for the company for the full financial year. They allow lenders to see the overall picture of the company in terms of its turnover, profitability, and strength in terms of assets and liabilities etc. They also allow lenders to compare performance with previous years, so be prepared for questions if turnover or profitability as dropped. They will want to understand why.

Management accounts

Financial Accounts are often outdated by the time they are available for viewing. Some lenders will therefore request to see Management accounts up to the most recent period available. These are useful for a lender to determine what the next set of Financial Accounts might look like and if there has been a deterioration in the latest filed accounts, they will be looking to see if the position has been rectified. Management accounts normally include and up to date profit and loss of the business and a balance sheet. If your company uses an accountancy package such as Quickbooks, Sage or Xero, then assuming you keep records up to date, these reports are easy to produce. Some lenders may also request to see cashflow forecasts to consider an application.

VAT returns

VAT returns, which are usually updated every three months are often used as an alternative to management accounts as they give a good indication of the turnover and expenditure for the period.

Application Form

Most lenders will require either an online application or application form which is filled out by yourself or a broker. Usually this requires a brief synopsis of the business – what the business does, how it does it and its USPs. The application form will require details of all Directors and significant shareholders. (In some cases, Directors will need to provide a Personal Guarantee to support the loan)

An application form will also require you to declare any other borrowings within the business. If the company already has loan payment commitments, then these will need to be considered when the lender is assessing the affordability of the new loan.

The Impact of Covid of your business

Lenders are particularly interested on how the pandemic has impacted business and what plans have been put in place to mitigate any negative impacts. This isn’t just about the financial impact but also about whether supply chains have been affected, whether customers have been impacted etc. Some businesses have been positively impacted by the pandemic and consideration should be given to whether those positive impacts will benefit long term or whether it’s just been for the short term.

Personal Credit Report

Whilst lenders do not tend to ask for Credit Reports from Directors upfront, they will carry out searches against you. Therefore, it’s always wise to obtain a copy of your credit report beforehand to ensure that there aren’t any issues which may affect your loan application.

Proof of ID and address

Lenders will usually need at least one form of Photo ID, in the form of a driving licence or a passport. A proof of address will also be required in the form of a utility bill or personal bank account statement. Provision of ID is to enable lenders to verify directors / borrowers are who they say they are and try to prevent any fraudulent activities. As searches will be carried out against Directors personally, it’s also a good idea to check your credit report beforehand.

If you are considering a business loan and are still unsure about what documents you need, please get in touch. We’re more than happy to answer any questions that you may have.

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