How to apply for a business loan effectively?
Have you noticed how difficult it is to ask for a business loan and how long it takes to get an answer? Banks are like any other company, they just want to earn more money but with our work, ideas and effort.
Your company is growing and has just signed an important project that requires financing.
Recommendation, even if you are satisfied with your bank, apply for the loan for your company also in other entities: you will multiply the possibilities. Do NOT get married to the bank, because banks change their staff, their commercial strategy, their financial conditions and the mood of their employees. Play both sides. It is completely legitimate.
Steps prior to applying for a loan for your company
There are many clients who ask us what help is available for companies without even having a company already created.
There is NO SUPPORT FOR A COMPANY THAT DOES NOT HAVE A HISTORY unless you are the competitor of the Iphone or the new Google.
You have to work hard to create a solvent company, with a history, that is solvent in the eyes of the bank.
Submit your application to several banks, to compare conditions and to have more options to get the financing. Also appoint a person who knows the needs of the company to act as an interlocutor and can answer any questions the bank may have.
See below what you will be asked to do and have everything ready to give a serious image.
Prepare your cover letter
It is clear that to ask for a business loan you have to go in person, BUT you will not see the person who is going to say your business loan. First of all, and if we are not very famous in the area, we must give an image of seriousness.
Company report
Prepare a dossier with information about the company (incorporation data, activity data, main milestones, explanation of your product, description of your facilities, data about your customers and suppliers…).
Include data on your competitors and the company’s situation in the market (if it is a leader in its sector, if it has chosen to look for market niches and has specialised…), as well as the current business expectations and the expected evolution.
Reliable, complete and comparable information
The financial institution will check and verify the information presented, so it is of vital importance that it is real and honest. The bank will check both the report (including an organisation chart of the company and a catalogue of products) and the basic information on your website.
It will also request the 347 form for the last closed year (information on transactions with third parties), in order to analyse the degree of dependence on customers and suppliers.
The most important things to take out a business loan
What the bank wants is the certainty that it will pay back the money it lends to your company.
Investment
You will also need to provide an explanation of the financing you are requesting, justifying the amount requested with quotes, proposals or invoices from the relevant supplier.
Justify the company’s capacity to meet the repayment instalments of the requested loan with a reasonable cash flow forecast and a justified business plan.
Emphasise the possible increase in cash flow that can be derived from the investment made.
Balance sheets and tax returns
Also submit annual accounts and corporate tax and VAT returns for the last two years, checking that the numbers are consistent with each other. Form 200, form 303, form 390 and form 347 are essential.
Also attach a balance sheet and an operating account for the current year, especially if the application is made after some months of the financial year have already been used up.
Historical aspects of your company
Provide proof that you are up to date with your social security and tax debts. The bank, for its part, will analyse your payment history (RAI, ASNEF) and consult your level of indebtedness in the CIRBE (Central de Riesgos del Banco de España).
Be especially rigorous in the veracity of the data provided, so that the bank does not find contradictions that could damage your image.
Other important information on how to borrow for a business loan
Personal guarantees
Nowadays no bank lends money to a company without the guarantee of the shareholders and/or directors. You will also have to provide your income and certificates that you have no debts with the social security or tax authorities.
If you can provide other guarantees, please give details and justify them.
In the case of real estate, with a registry note; and in the case of personal guarantees, with personal income tax declarations.
Commercial incidents
If the company has had any incident (for example, a one-off unpaid debt that is expected to be resolved shortly), state this for the record, explaining the reasons for the incident.
When applying for bank financing, prepare a good presentation report, justify all the data with the corresponding documentation, and explain any incidents.
This will give you a better chance that the bank will accept your application.
