Getting the best loan for your business means capitalising on the potential of your business start up so you can get the best loan on terms that suit you.
There are lots of ways to obtain funding for a new business – from government grants to angel investors – but getting a loan is still the most popular way for a new business to raise money. Finding the best business loan is only part of the battle, however. You’ll need to make sure your business is in the best possible shape and leverage its assets and performance to secure a larger loan on favourable terms.
How to get a loan for your business
Whether you’re applying for a business loan from high street bank or a personal loan for business purposes from an organisation such as Start Up Loans, getting a loan in the first two years of trading means having to make the most of your trading performance to date to convince the lender you’re a good investment.
Find out how to get a personal loan from Start Up Loans for your start up business >>
1. Make the most of capital investment
As your business grows, it starts to acquire capital – either from other investors or from money that you’ve put into the business yourself. Capitalise on this – investors will be more confident if you’ve raised money from others or have invested your own money into your new venture.
2. Show a strong cash flow
Once your business has been trading for a year, you can show potential investors your cash flow when applying for a business loan. Banks and building societies will want to see evidence of a strong cash flow, as it shows your business can meet loan repayments. Create a three-year cash flow forecast – how you think your business will perform over the next 36 months – to convince a lender that your business can repay the loan.
3. Show your business’ collateral
While unsecured loans are preferable for a small business, they’re usually limited to lower loan amounts than secured loans. Unsecured loans – such as the ability to borrow up to £25,000 from Start Up Loans – are great for start up businesses looking to get started or in their earlier years of trading.
Some lenders might be unwilling to offer a secured loan. If so, it’s possible to offer up collateral to secure a loan against, such as business premises if owned by you, or assets such as plant machinery, which may make a lender willing to offer a secured loan.
Read our free guide to understanding the difference between a secured and unsecured business loan >>
4. Demonstrate your industry knowledge
Your new business operates in a competitive environment, and against a backdrop of legal and government policies. Lenders will be reassured if you can show that you know what’s happening in your industry, what trends are emerging, and the potential market threats and opportunities that could affect your business. Perform a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of your business, and read up on market trends so you can show off your knowledge.
One of our loan recipients, Start Up Loans ambassador Sara Roberts, made sure she had throughly researched her target market and industry of health foods and snack vending. This put her in a very strong position to apply for finance from Start Up Loans for her business Healthy Nibbles.
5. Get character references
The way you present yourself and show confidence in your ability to grow your business can have a big impact on getting a great business loan. Build a positive image of yourself as the business owner – such as obtaining endorsements from people you’ve done business with in the past.
Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.
Our free Learn with Start Up Loans courses opens in new window include:
- Entrepreneurship – from ideas to reality
- First steps in innovation and entrepreneurship opens in new window
- Entrepreneurial behaviour opens in new window
Plus free courses on finance and accounting, project management, and leadership.
Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.
