TIPS FOR GETTING BIG BUSINESS LOANS

While lenders have different loan packages with varying conditions, these are general information they all require from borrowers

It is true that many people, including economists, have complained about the high interest rates entrepreneurs have to pay on loans. It is also true that business owners are decrying the difficulties they face in their quest to access credit facilities from banks.

The impression several entrepreneurs give is that if the nation’s financial institutions become very stable and strong, and are willing to give out loans with interest rates that are much lower than what is obtainable now, their funding challenges will be over.

But even if things improve as expected, experts warn business owners to realise that they cannot just walk into the bank and get loans because they run a business with ‘great prospects’. It goes beyond that. Banks are expected to (and will) ensure that certain things are in place before they grant your request.

Some of the information will be about the entrepreneur and his team, while others will be about the business. For you to succeed in your quest to get business loans some of the things you will be asked to provide and what the bank will look out for are highlighted below.

PERSONAL INFORMATION

Before you get a loan, the bank will have you provide information about yourself. The information may cover such things as your background, educational qualification, work experience and address. You may also be asked to answer questions about your health and legal records. Surely, the bank would want to know if you have a criminal record or have been enmeshed in scandals and controversies, for instance.

While a bank will be less likely to give you a loan if you have a criminal record, for instance, experts strongly advise that you should avoid lying when asked to provide information because the bank is likely to find out in the course of its background check on you. Let’s say you own three different companies and you need additional funding for one. When you go to the bank, a question may be asked you is if you own other business. When this happen, even if you believe you stand a better chance of getting the loan if the other two remain unknown, tell the truth. By doing that, you still stand a chance, but when you lie and the truth is uncovered, it’s ‘request denied.’

STRENGTH OF MANAGEMENT TEAM

You may think this shouldn’t be the bank’s business, but it is. Top bank managers will tell you that as long as you have a management team that is incompetent, it means your business will stand little chance of recording growth, thereby risking failure. This, in turn, will make it impossible for you to repay the loan. That is not a situation any bank will be pleased to find itself in. So, to enhance your chances of getting that ‘seriously needed’ loan, ensure you have an impressive management team in place. It may make the management of the bank say, “With such a management team, we are sure to get our money back.”

CREDIT WORTHINESS

Banks run credit checks on entrepreneurs and companies before giving them loans. So, if you have been ‘notorious’ in your dealing with banks in the past, then brace yourself, the past is coming back to haunt you. Also, banks run credit bureau checks with the Central Bank of Nigeria, and if it is discovered that you are indebted to other banks, for instance, you may fail to achieve your goal. It is important that you are credit worthy and the CBN will have a say in that. So, find out what your credit rating is and if there is need to improve it, do so before sending in your loan application.

If you are already running the business, the bank will require a business credit report from you. It is important that you keep the report accurate as it will also have an impact on the process.

BUSINESS PLAN

Without a good business plan, you won’t get money from the bank. Banks will only approve your loan request if they know that your business is solid or that your plan has great prospects. So, in order to boost your chances of getting a business loan, have an excellent business plan. Your business plan should be designed in such a way that it is attractive and good and has projections.

TAX DETAILS

You will need to submit personal and business income tax returns generally for the past three years. You will likely have to also sign an authorisation form, so that the bank or lender can verify that what you said was filed with the Federal Inland Revenue Service was actually filed.

FINANCIAL STATEMENTS

Generally, all owners of businesses have to provide personal financial statements. So, you might as well start pulling that information together. The business will also need to provide current financial statements, including balance sheet, profit and loss, and sometimes a statement of cash flow.

BANK STATEMENT

You will need to provide personal and business bank statements for at least the past three months. Some lenders will require a full year’s worth of statements. Again, start pulling the information together, because you will need to provide it at some point.

PROOF OF COLLATERAL

The bank will want to see some kind of collateral for the loan. The bigger the loan or the higher the risk, the more collateral will be required. Prepare a statement that shows a list of all assets, along with descriptions and current fair market value.

LEGAL PAPERWORK

And, of course, you’re going to have to provide legal paperwork. Be ready –