Advice for approaching a bank for a loan
Hi folks My wife and I are looking at starting our own business up in our local area, now here is my question and the area I’m looking for advice on. I recently went bankrupt which obviously rights myself out of the question of getting a business loan or does it? My bankruptcy was due to life changes and not being able to afford the lifestyle I had previous had, not due to any business failings, does this make a difference? My next question my wife has a bit of a debt, do you think if we put together a very high quality business plan for our project the bank would even look at her because of her debt? Any help or advice would be great!
In my recent experience, banks just aren’t lending money AT ALL.
you could have a look here:
for the government sponsored enterprise finance guarantee.
best thing to do is just go to the bank and ask.
I would have to second that as the banks are not into the taking chances game and just want to charge its customers at any cost. It sounds as if your bankruptcy is recent which would rule you out out applying for any decent credit anyway. But it does not stop you from trying to start a new business. So with that in mind, go for it.
One of the important things that banks and other financial institutions look at is your credit history and having already avoided paying debts that you had incurred once they would be unlikely to put themselves in a position where they would lose money if you did it again
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Banks have never ever to my knowledge leant money to small businesses without the owner putting up a fair chunk of the required monies. Normally for a micro start the ratio is 50:50. Sometimes if there are (resalable) assets invovled they go to 60:40 or even 70:30, but this generally requires excellent credit history, and ALL of the above will generally require a personal guarantee on equity within your home. So if you have no cash to put up and no assets to secure against, then you are not going to get anywhere, bad credit history or not.
Banks are ARE lending, to people with good credit and a credible business plan putting up 50% of the funds, as they always have done, albeit at very high rates of interest, but that’s as its always been too, so I wouldn’t blame the current economic outlook on all that much.
In your situation however its simply not going to happen.
James Smith [i]Chartered Accountant[/i] www.jamesesmith.co.uk --------------------------- Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
I have also found that our bank has been very interested in lending over the last 6 months or so. We have had a good and long relationship, however, and suspect that we may be viewed as one of their safer options. Afraid I would probably echo the other posts as it’ll be a struggle if you’ve had previous problems with bankruptcy.
On the constructive advice side, if you do decide to approach them, I have always had my best results by being absolutely specific with all of the details – what you need, what you will achieve, your contributions, where your forecasting data has come from etc etc – make sure you have nothing estimated in your business plan at all as you may already be starting from a disadvantage.