Ten Ways to Prepare for your Loan Application

Preparing documentation for a loan can be burdensome, but if you do the hard work in advance it makes the process a lot easier.

In this article, we’re taking a look at ten simple steps you can take that will prepare you to get loans approved and paid quickly.

#1 Keep Your Accounts Up To Date

Lenders will need to see financial information to verify the financial position of the business. This can take many forms: some lenders ask to see bank accounts while others may look into your accounting system.

The best way to prepare is to make sure that your accounts are up-to-date and you can confidently demonstrate the following: a cash flow position, debtors and creditors, an up-to-date profit and loss account, balance sheet and cash flow statement.

Modern cloud-based accounting systems are excellent at producing useful and accurate financial documents. Xero is an example of an excellent system. Once it’s set up and reconciled with your bank account, you can quickly match payments, and prepare up-to-date accounts.

#2 File Your Accounts on Time

There is a recognised correlation between insolvency and businesses that file accounts late at Companies House.

Many lenders use late filing of accounts as evidence that a business is disorganised and perhaps struggling. Make sure that you get everything filed on time, so you don’t raise any red flags to lenders.

#3 Forecast Your Cash Flow

This is particularly important if your business is seasonal or has working capital issues. If you’re able to forecast when cash issues are likely to emerge it enables you to approach lenders in plenty of time to discuss the best plan – always better than having to rush in a time-pressured situation.

Accounting packages allow you to set budgets and to help you see if problems are emerging. There are also third-party plug-ins that are very sophisticated, for example, Float.

#4 Have a Good Business Plan

Alongside more quantitative financial factors, many lenders will look at what the cash is being spent on and whether it makes good business sense.

Part of the planning process is about making it very clear to the lender how the money will be used and the commercial logic behind the investment.

For example, if you’re a hotel in an area with huge demand for weddings and an investment in the main hall will allow an increase of 50% in bookings, then make that clear and back it up with evidence. Make it compelling to the lender.

#5 Have a Robust Financial Plan

Leading on from point four you need to back up your plan with hard numbers. Taking the example of a hall renovation, it’s ideal if you can:

• Lay out costs.
• Show that repayments are affordable.
• Demonstrate the return-on-investment.
• Factor in how you will deal with delays and problems.

Overall, the figures need to show that the project is commercially viable and that repayments are comfortably affordable.

An excellent plan will show some scenario planning that accounts for good, average and, most importantly, bad outcomes. The plan should still be viable if things go worse than expected.

#6 Ensure your Security has the Requisite Value

If you are planning to secure your financing against an asset, be it property, equipment, invoices or personal assets, make sure that you have done the right due diligence to ensure the assets are worth what you think they are.

Deals can be scuppered if assets aren’t of the right value to secure a loan. For example, if you are planning to use property as security, get it valued by a reputable surveyor that understands how lenders value property, so you get a realistic valuation. Similarly, if you are securing financing against invoices make sure that the invoices meet the criteria of the factoring business you plan to use.

Specialist equipment that is highly valuable to you but hard to resell is often worth a lot less than business owners think.

#7 Have Key Documents at Hand

Lenders will need to see a lot of business documents in the due diligence process, so make the process easy by having everything at hand.

This means at the very least: bank statements, company accounts, any charges over assets, invoices and details of other financing. Every lender is slightly different in what they require and the greater the loan, the more information will likely be needed. If in doubt get in touch with the lenders and find out what they need.

#8 Details of Debt and Charges over the Business

As mentioned in point seven make sure you have documentation of any charges over your assets. Lenders will need to understand who other creditors are and where their debt sits in the creditor list.

Also, details of current loan agreements, terms, outstanding amounts and payment terms will be necessary.

#9 Work with Great Professionals

An accountant will help make sure your documentation is in order. A solicitor will quickly and efficiently check and advise on loan documentation. A surveyor will be able to value assets accurately.

It can’t be overstated how important these professionals are in readying your business for lending so make sure you work with good ones.

If you aren’t sure who to use, your lender may be able to assist.

#10 Build Relationships with Lenders

If you think lending is looking necessary in the future, whether it’s for working capital or larger amounts, take the time to build a relationship with reputable lenders.

Reparo Finance provides lending that is client-focused. We get to know your business and circumstances, so we’re able to offer the right package to suit your circumstances.

Get in Touch With Reparo Finance

Reparo Finance specialises in reviewing, approving and completing loans quickly and efficiently. Reparo offer business loans from £10,000 up to £1m+. To speak with one of the team, please get in touch on sales@reparofinance.com or 0161 451 5714.