Here are five simple ways through which you can increase your chances of getting a loan from a bank, and grow your business.
· Number one, you must understand why banks give out loans in the first place. Banks give out loans because they expect to be paid back. They will therefore only lend to a business purpose that they think is sound. A bank will not lend you money unless you can show that bank that you have a good business plan and that you will use the money that you are given as your business plan says.
· The second thing is your reputation. Do you have a record of borrowing from banks and repaying what you borrowed? Or have you borrowed from other banks and not paid back? If you have a track record of not paying loans you have taken or issuing cheques which bounce, most banks will not be willing to lend you money.
· Number three; do you have a good accounting system in place for your business? Many banks will only lend to businesses that have a good and accurate accounting system. The accounting system must show that the owner’s accounts and the accounts of the business are separate. The accounting documents which banks like to see before they lend you money for your business are the profit and loss account of the business, the balance sheet, the cash flow statement and etc.
· Four, are you familiar with your industry? It is easier to convince a bank to lend to you if you are able to show that you understand the industry that you do business in and, that you understand the value that you bring to that industry. Do you know who your major competitions are? What do you offer that they do not or cannot? How do you intend to win a bigger market share over time? If you can show that you understand your competition and how to get ahead of them, banks may consider your business a good one to support.
· Finally, be persistent. Many small business owners try just one of two banks and then give up on their goal of getting a loan because they have been rejected. It is important to know that banks have different business areas in which they focus. They also have different areas of knowledge. Some banks prefer to lend to really big companies while others prefer to lend to small or medium sized ones. If you really need a loan, don’t give up after trying just one or two banks.
If you have a good business plan, keep the right accounts and find the right bank, chances are that you will get the loan that you are looking for to grow your business.
This has been courtesy Wema Bank as part of The Bankers Committee Financial Literacy Public Enlightenment Programme brought to you by The Bankers Committee, comprising all the commercial Banks in Nigeria and the Central Bank of Nigeria, CBN.
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