How to... get a bank loan

What's the best way to approach your bank manager for money? "The classic joke is on all fours, of course," says Steve Everhard, of the entrepreneurial advice team at the business consultants Grant Thornton.

A more serious answer is the boy scout's motto – be prepared. Know what you want; understand what the bank might be willing to offer and on what terms; and understand your actual or potential business from top to bottom and from inside to out.

"The issue, at the moment, is being very sure of your own cash position," continues Everhard. "If you don't do your homework, there's no point in going to the bank. Go to the bank with a plan.

"Times are hard, and getting money out of your bank is hard. The bank is going to want to be very sure that you are doing all the right things to protect the business and to protect the bank's exposure. You always have to look at it from the bank's perspective."

Honesty is one of the best principles with a bank, believes Everhard, especially where the business is already trading. "You have to be open about why you need the loan in the first place," he says. "What is happening in the business? Was this expected? What the banks are looking for at the moment is openness. But lots of businesses don't feel they can be open at the moment."

Businesses that are already trading should in any case consider carefully whether they really need to raise some extra cash. Banks will not want to lend to a company if the money it needs is locked up in the business because of poor cash flow and credit management. "Make sure that your own cash management is good first, and then go to the bank," advises Everhard.

The most important thing is preparation, stresses Stephen Alambritis of the Federation of Small Businesses. "Good information, top knowledge, up to date," he says. "If it's an existing business – how it's doing. If it's brand new, what it's going to do.

"The other thing is to show your personal commitment, with personal guarantees, your time, putting your house on the line."

It is important, stresses Alambritis, to support yourself with an excellent professional. "Arm yourself with a good accountant you have known for a long time," he suggests. "If you belong to a trade association with a warranty, put that into the pot. And be focused."

It is also important to think about how to impress the bank manager on a personal level. "If a meeting is arranged, don't cancel at all costs," says Alambritis.

Bank managers have their own preconceptions and prejudices. Alambritis suggests potential borrowers ask around to find out which managers are most sympathetic or hostile to particular sectors. If one manager has a reputation for being sceptical about the prospects for care homes, it makes sense to arrange a meeting with a different manager at a different branch when seeking funds for a care home proposal.

Even within the same banking group, individual bank managers have various approaches, which can be the difference between being funded or rejected, explains Alambritis.

It is also important before a meeting to look at the British Bankers' Association website to see banks' charging structures for loans and overdrafts. Knowledge of standard terms helps the potential borrower to negotiate lower charges and will also impress the manager that this is a person who prepares. "Challenge what you are being offered in a friendly way, but firmly," advises Alambritis.

Rosana Mirkovic, an SME policy adviser at the Association of Chartered Certified Accountants, is another who stresses the need to be on top of your business brief. "It's good to have enthusiasm and passion for your business, but you also need to back it up with evidence," she says. "Perhaps testimonials from customers, or show your past experience from your previous work.

"You have to have very, very good cash flow forecasts, especially now. Run these past someone – we would say an accountant, of course. Get them checked. Make sure you can answer tricky questions about falling demand, or what will happen if your orders decrease by 15 per cent. Plan ahead for that worst-case scenario."

The point is emphasised by Everhard. "Before you go to the bank, do everything you can," he says. However, even that is not a panacea, he acknowledges. "You still might not get any money, but you do stand the best chance."


SMEs which have difficulty in obtaining funding from banks should consider seeking support under the EFG, suggests Rosana Mirkovic. This provides government guarantees for up to 75 per cent of loans of £1,000 to £1m, for up to 10 years. Borrowers must pay a guarantee premium of 1.5 per cent in the first year and 2 per cent in subsequent years.

Life and Style
food + drink
Arts and Entertainment
musicBand's first new record for 20 years has some tough acts to follow
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvSeries 5 opening episode attracts lowest ratings since drama began
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments