Like any other loan, applying for a commercial mortgage for your business is something most new business owners will have to do.
And, like any other loan, getting a yes is the hardest part to opening up your business. If you are weary about applying, first and foremost remember: banks need to give out loans, in order to stay in business. Apart from this, these are a few other tips to keep in mind, in order to get the yes answer you are looking for.
Be prepared –
If you walk in to the bank and ask for a £100,000 loan, but do not show them how you plan on using it, you might as well forego the application process. When applying make sure you have everything squared away. Have prospective earnings portfolios prepared, show the bank comparatives (in regards to similar businesses in your industry), show cash flow statements, showing all costs, things like taxes, insurance etc , and a repayment plan.
The more research you have done about your business, the more you have to show them (in terms of ability to repay), and the more prepared you are, the higher the likelihood of being approved.
Anticipate questions –
You are going to hear dozens of questions thrown at you, including:
- How will you spend the money?
- How much do you expect to earn the first five years of business?
- How will you compete with established businesses?
These are a few of the many questions that are likely to be posed during the application process. This goes back to being prepared. If you have researched, if you know what competitors earn, if you are aware of potential losses the first year in business, and so forth, you are going to be able to answer any of these questions. Anticipating the tough questions will make the loan process easier, and will increase your chances at an approval as well.
Dress the part –
If you want to showcase yourself as a prominent new business owner, you can’t walk in the bank in a pair of jeans and a baseball cap. Dress the part, and show the lender you are serious about the loan process. Not only does this give them more confidence in you, it will also make you feel more confident when you walk in to speak to a mortgage lender. Its a business transaction, so treat it like one.
Never be negative –
Most businesses fail the first year; in fact, they tend to lose money before any profits are ever made. Present yourself as an entrepreneur, and someone who can repay the loan. Show the loan officer promo materials you have developed, an online site, and other things you have done to sell your business, before you open your doors. These ads and press releases not only show you know you will succeed, but have put money in to the business, and have a plan to repay the loan.
If you anticipate the worst, it will happen. Have a positive attitude, even if you aren’t 100% sure where things will go. Not only are you more likely to be approved, but you are also more likely to receive better terms on the loan as well.