Part 1 – Before you Meet with the Bank.
There are a few very important things you should do before you pick up the phone and book a meeting with your bank manager to get your business loan, and depending on your situation they may take a little time to prepare.
Credit History
One of things a bank will do by default when you ask for a business loan is check your credit history. This can take into account credit cards, mortgages, car loans, even student loans. The odd late payment here or there usually won’t affect your score too much, however any significantly late payments, or any situation that ended in court, will affect you ability to secure a loan.
So if you’re in this boat what can you do? Well, if you can show cause for a period of poor credit records you will be able to improve your chances of securing a loan so long as your credit record before this event was good. Perhaps you went through some type of life crisis such as serious illness, divorce, a family death or other significant situation. The key is deal with any problems with your credit history up front and include an explanation on your application.
Demonstrating Your Experience
Banks don’t like risk, and their alarm bells start to ring if you are asking them to back you in an industry you have had no previous commerical experience. If this is you, there are a few things you can do to help ease the fears of your bank manager:
- Enroll and begine tertiary education directly associated with the industry of your new business (preferably well in advance of your bank meeting)
- Ensure your business plan clearly demonstrates skills which cross from your existing experience to the new field. For example if you currently run a used-car yard, but want to sell that business and open a restaurant, be sure to spell out the existing skills you have that transfer to this new field, such as customer service experience, business administration skills, staff management skills, and so on..
- Find mentors and ensure they are listed in your business plan. A mentor is anyone that has deep experience in the field of your new business, and is willing to provide you with guidance to help you succeed.
Setting aside the need to impress your bank manager, you really should aim to get practical experience in the industry you intend to open your business before you financially commit. It’s only through practical, real world experience that you get a true sense for what’s required to be successful.
In the next article we’ll look at how to demonstrate your understanding of the market and competition.
* As always this advice is general in nature and does not take into account your specific circumstances. Always consult your professional adviser. *
