What sort of things do potential business lenders look for when considering start-up finance?
Reference has already been made to how your personal financial status will be considered when you’re obtaining finance for a small business.
The basic thing they need to know is whether the business loan will offer the bank, organisation or individual a good return on their investment. They want to know if this business is going to be profitable and will you be able to pay them back with interest.
Just a vision for a great product and service and lots of exciting marketing plans won’t be enough. They want facts and figures.
For example, they will want to know your projected spend on equipment and all your outgoings.
How has your product or service been priced up, and what margin of profit will you have? How many units, or hours of work, will you need to sell to break even or start making a profit?
If you already have a full order book and a queue of customers, that’s great. However, if the amount your business is spending on its stock, premises, salaries and other outgoings is too high, you could still make a loss!
The other things that can help you to get a green light when obtaining finance for a small business include your existing experience and a good understanding of your potential customers. You need to show research into whether there is a demand for what you are selling.
For instance, you may dream of being a Life Coach, but are there 20 others locally who are more established, or do you live in an area where few people would feel the need for your services?
If you have worked for someone else for many years as a chef, you might want to set up a restaurant or food truck where there is a gap in the market. This is the sort of information that makes finding finance for small business easier.