Finding the right finance is crucial to get your new business venture off the ground.
Being approved for a startup loan is an exciting prospect. It may well be the moment that a business idea becomes a business reality. Or it may help you bridge the gap between what you have right now and a future of new and better things. However, there is a lot of competition for startup loans and, given the rather ugly statistic that 50% of UK startups fail, it’s easy to see why lenders can be very cautious. So how do you improve your chances of being approved for that essential startup loan that will help your business venture fly?
Make sure you have more than just an idea
Every startup begins with an idea but a flourishing business comes from much more than just an idea so no lender or investor is going to fund your idea if there is no substance to the idea and no plan on how to make the business a reality.
If you want the best possible chance of being approved for a startup loan firt time around then it’s essential to show that you have both the idea and the practical plan to put it into place. It doesn’t have to be the perfect business plan and it doesn’t have to be 100% accurate. However, there must be some demonstrable, practical steps to take you from ‘a great idea’ to ‘a great business’ – and the plan but be professionally written and presented.
Create a solid business plan
This is one of the most crucial elements to any type of startup loan application – whether you are seeking £1,000 or £100,000 (or more) so dedicate plenty of time and effort to getting it absolutely right. Your business plan should contain the following as a minimum:
- Ownership and Management – the range of professional or academic qualifications, skills and experience within the whole team, including the owner and management team.
- Company Overview – what is your business going to provide or make (i.e. what is your main product(s) or service) and what value will it add to your clients and customers?
- Market Analysis – identify the market sector that you are serving, or plan to serve, and who your main competitors are in that market.
- Marketing and Advertising Plan – what are you going to do to find new customers and keep existing customers? You may need to distinguish between traditional forms of marketing and digital or social media marketing.
- Financial Projections – 3-5 years’ worth of predictions about how your business will perform will be expected, including cashflow analysis
Focus on management and industry experience
It’s unlikely that you will have direct experience of the job you are about to do unless you have previously run a company. However, if you can show that you’ve already experienced something similar and transferrable then this will significantly improve your chances of being approved for a startup loan. For instance, if your startup is an IT business and you have previously worked in an IT department of a blue chip organisation then that will clearly be relevant experience. Prior business management experience is particularly impressive because it will reassure a lender than you can also manage the business aspects of a new venture. And anything you’ve done within the industry your startup operates in will demonstrate knowledge and familiarity that will strengthen your case.
Take some expert advice
Even if you have to pay for it, a little expert advice can go a long way. If you’re going to a lender asking for £25k to start your business that’s completely different from approaching a lender with expert advice from an accountant, mentor and financial advisor that says you need £25k to get your business off the ground. One is instantly more credible than the other.
Remember that the burden of proof lies with you
When you are seeking business funding it’s up to you to prove that you’re a good credit risk and to provide as much possible information to show why a startup loan to you is a good idea. That means making sure your own personal credit report is solid, that you have a great, detailed proposal and that you have all the information a lender could possibly need at your fingertips.