What your bank will want to see when you apply for a loan

By: Rob Warlow

Date: 22 July 2010

To help banks assess whether you’re a good risk when you apply for a loan, they will give you a shopping list of required information. Failure to oblige with the right information can lead to months of delay in getting an answer. So what will your bank want to see?

1 Business plan

In the relatively short space of time you have with the representative of you bank, it’s impossible to effectively convey every aspect and nuance of your business. A business plan can do that. It’s is a ‘convincer’ for the bank and a control and check for you. A plan can highlight flaws in your business idea and potentially save you from making an expensive mistake.

2 Financial statements

Bankers love numbers. Your annual financial statements may not mean much to you, but to the bank they offer a wealth of important information. Don’t apply for finance if your financial statements are out of date. Going to the bank any time greater than three months after your financial year-end without your accounts will simply result in the bank telling you to get them done.

3 Management figures

You may have your financial statements produced within three months of your year-end, but it’s still three months of trading since you closed your books and a lot can happen in that time. The bank will want to see management figures.

The format doesn’t have to be complex; it can be as simple as an Excel spread sheet to accountant-prepared figures. You can also get accounting software that easily prepares monthly figures for you, so there’s no excuse for not having up-to-date figures on business performance.

4 Profit and loss and cashflow projections

Your projections are your view of where you think your business is going to be financially in one, two and three years’ time.

The bank will want to see to prove your business can afford to pay back the loan or overdraft facility. They can also be used as a tool to monitor future performance against your estimates. And by preparing forecasts, you will be forced to think through your numbers first.

Preparing financial forecasts can be daunting, especially if you have never done them before, so seek help, perhaps from an accountant, if necessary.

5 Personal financial statements

Increasingly, banks are taking a greater interest in business owners’ personal financial position. Banks have realised that many business owners have raided savings and ‘maxed out’ on personal overdrafts and credit cards to keep their businesses going.

Banks will ask you to complete a personal monthly income and expenditure report and an assets and liabilities statement, which will give them an immediate overview of your financial position.

6 The list could go on

Each lending request will be treated differently and may lead to your bank requesting more information than I’ve outlined above, but this provides a good introduction.

Rob Warlow helps business owner’s deal with their banks to obtain funding or assist in re-building damaged client-banker relationships. He has written a book called ‘Loan Sharp: Get the Business Finance You Deserve’ which is available via Amazon or on his website.


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