What would a bank look at when assessing a business borrowing request?

Despite what you may think a bank is always keen to provide finance to businesses in order to support their growth.

When a bank assesses any borrowing request they will look at a range of factors to help them with their decision, with this in mind and in order to help with preparation for any borrowing request we have detailed below some pointers for consideration.

It is important to note that consideration by a bank on access to finance requests by a business will involve credit scoring which could take into consideration 3 broad areas.

• The information that a business provides as part of its application.
• Any information which the bank may already hold about the business.
• Information that they obtain from external credit reference agencies.

The information which a finance application will require is:-

You and your business – as they will wish to gain a full understanding of the business and the skills and experience of the owner/management.

Personal / Business Investment – as they will need to establish what the applicant's investment is in the business compared to what a bank’s investment might be.

Purpose – why is the funding required can be explained by advising how and where it would fit within the business and its plans.

Amount – this will allow a bank to determine if the amount being requested is appropriate as well as allow the structuring of the funding in the most suitable way.

Term – Discussing the time period over which the funding is required helps a bank in assessing the businesses finance options in the most suitable way.

Repayment – a bank as a lender of finance will need to understand how a business intends to repay the funding as well as be confident in the businesses ability to do so.

Other information and supporting documents may also be required such as:-

Security/assets – relates to the provision by the business and/or owner of some form of appropriate security such as guarantees, property or other assets that are straightforward to value and if necessary to realise.

Other business interests – informing of other commitments which the owner and/or the management may have as this will allow a bank to assess how much attention and focus the business would have.

Cash flow forecast and business plans – regardless of the type of business or how profitable it may be, it will struggle if it runs out of cash. Therefore by writing a business plan will help a business to think logically about its operation, its strategy as well as its business model.

Management accounts and historic accounts – evidence of past financial performance will contribute towards an existing business funding application.