Bank finance

Is your business ready for bank financing?


When you seek finance for your business, you will give yourself the best possible chance of success if you are clear about your business' requirements. Consider the following:

1. Why do you need business funding?

It may be to finance business expansion, to develop or exploit new products, for new premises or a number of other reasons. It should be for something specific, and be carefully costed. Banks will want to know the business case before they agree to supply funding, so you should think about the reasoning, the potential outcomes of the investment and how you will repay the finance.

2. How much funding do you need and when will you need it?

Although it does not make business sense to borrow more than you need, you should be careful not to underestimate - aim for the optimum amount. You should also consider whether you need all of the money at once, or whether staged amounts would work, as this may reduce the cost of borrowing with lower interest costs and initial repayments.

3. How are you going to repay the borrowing?

You will need to repay the loan in the future, with interest. Ask yourself when you are likely to start seeing a return on your investment, and how much the monthly repayments will affect your cashflow.

4. What is the right source of finance for you?

There are several different types of investment finance, and you will stand a much greater chance of securing financing if you can clearly explain why the source you are approaching is most appropriate for you, and any potential drawbacks.

For more information, see types of bank finance for businesses.

5. Is there anything that would impact your chance to borrow?

There are some things which will weigh against an application for loans or other funding:

  • unauthorised overdrafts
  • missed loan repayments
  • County Court judgements against the business or its directors
  • adverse credit rating data, against the business or its directors

There are also some factors which would automatically disqualify a potential borrower. These include:

  • a history of illegal activity on the part of the business or individual
  • if the business is in administration, or the individual has bankruptcy proceedings in process against them
  • where the potential borrower is under the age of 18
  • when the business could pose a risk to the reputation of the bank

Bank finance may not be the best option for your business and there are a number of alternatives available to you - see business financing options - an overview.

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