How To Apply For A Business Start-Up Loan Part 1

When you are starting a new business venture, it may seem daunting applying for a start-up loan. The first place business owners generally turn to is their bank. Banks have a major role to play in business funding and despite any adverse publicity banks have received over the years, they are still the primary source of business finance.

Part of the emotional experience is fear that the bank will reject your start-up loan application, when actually banks want to help. After all, they make money from lending money to business and personal customers. However, they must lend responsibly. Rather than being completely absorbed in your needs and wants as a business owner, detach yourself from these emotions for a short while to understand what you need to do to meet the bank’s requirements so that they are able to lend you the funds to help your business.

Let’s look at some of the key issues you must tackle if you wish to be successful in obtaining a start-up loan for your new business…

1)      Be Professional

Many people have great ideas and aspirations about starting a business. However, just because they may be good at a job does not mean they have the skills to run a business. There are many enterprise agencies, or business skills training centres around the country. Visit these places and enroll on as many courses as you can. You may be surprised at what you do and don’t know. The information they provide can be priceless. Invest the time whilst you can. When you do set up your business, it is generally too late to take time out to visit these places.

2)      Do Your Research

I expect this will feature in the skills training mentioned above. If not, this is what I believe your research should consist of, but will ultimately depend on the type of business you are setting up:

a)      Market research

  • who are the leaders in the industry and why is this?
  • who are the main competitors in your region?
  • how big is the industry?
  • is there regional or national coverage?
  • is competition on a national, regional or local basis?
  • is there sufficient market for a new entrant?

b)      SWOT analysis – this is simple and covers Strengths, Weaknesses, Opportunities and Threats.

You need to complete this for your business and your main competition. In general your answers will be your opinion, but if you can support this with any data it helps. With any analysis you need to be realistic. As a start-up business, a bank will not expect you to have all business skills. However, it will expect you to have a well thought out plan which shows you are a budding entrepreneur. Recognising your weaknesses and knowing what you will do to overcome the weaknesses is important.

c)      Location – If the location requires specific requirements for you to be undertake your business, then choosing the right building and location is critical. For example, if you are opening a shop, then high footfall and good parking are important to you.

d)      Data – Collate data on costs of equipment etc that form part of your funding requirement. Be clear why specific equipment is important and why one version is a better option than another. Do you need staff? In other words, demonstrate to a bank manager that you know your business and are making excellent choices that make good business sense.

e)      Marketing and sales – You can have the best equipment, the best operation, the best staff, but, if you haven’t got a system of attracting customers, then you haven’t got a business. This is the KEY area where many start-up businesses fail.  You need to establish a SYSTEM for a reason…so that this is ongoing and not a one-shot deal but a perpetual machine.

f)       Research – What are the projected costs for your new business? These should include building costs, utilities, rates, rent, plus all other business costs such as staff, insurance, telephone, marketing etc. Know your numbers from the outset. Yes, they may be estimates, but base them on as much solid data as you can get. Talk to other business owners close to where you wish to set up your business. Ask if they can share data on their running costs. This way you don’t get too many shocks.

Now that you have taken the time to gather, understand and interpret this information, you are ready to write your business plan. In part 2, you’ll discover how to write a simple business plan that presents your case for a start-up loan in a professional manner.

Starting a new business venture? Need a start-up loan. Let’s look at some of the key issues you must tackle Click To Tweet