Running a business is tough at the best of times, but Coronavirus has made it more challenging than ever. Covid-19 has hit corporations hard and destroyed market confidence in all sectors.
As profits continue to decline, so has the faith of investors to back companies. Just when many businesses need it most, credit has become harder and harder to find.
Where to get a business loan from?
Banks and investors are aware that peaks and troughs happen and know the downturn won’t last forever. While achieving funding might be harder than usual, lenders like biz2credit are still willing to back companies with good ideas and a firm entrepreneurial spirit.
The key to attracting investment is to show you are aware of the current threats to your business and demonstrate an actionable route out. Here are four ways you can improve your eligibility for a business loan.
Prepare financial statements
If you’re in business already, the most convincing way to prove your eligibility for a business loan is to show existing profit and loss accounts. A lender is far more likely to back you if you can prove your company previously turned a profit.
Alternatively, if you’re just a start-up, ensure you prepare a thorough business plan showing anticipated expenditure as well as clear profit and loss forecasts. Lenders are more inclined to back well-conceived, structured business ideas.
Explain why you need the money
You’re considerably more likely to get backing if you can clearly explain why you need the money and how it will be used to benefit your company. Investors are particularly interested in sustainability and growth. Showing a lender how their cash will have a positive and prolonged impact on your operations will motivate them to offer you support. More importantly, it will also let them know you’re good for the money they lend you.
Remember, a business loan is just like any other – money that ultimately needs to be paid back. Just as in real life where you wouldn’t lend somebody if you didn’t think they could pay you back, business lenders are the same – they need to see clear evidence of a return on their investment.
Determine the amount you need and the length of the repayment plan
Before approaching any investor, bank, or lending institution, you must have a clear idea of how much money you need to borrow and how long it will take you to pay it back. Lenders aren’t interested in fanciful estimations – you need to provide a clear, structured repayment plan with clear evidence showing how you’ll afford the outgoings.
Most loans are offered on the agreement of monthly repayments (i.e., a base fee with interest), so you should provide account forecasts clearly showing how you will meet your current expenditure as well as the loan repayments to your lender.
Demonstrate business viability
It’s an unfortunate truth that some companies will not survive through Coronavirus. If you’re going to achieve the backing of an investor, you’ll need to show a viable business model that is capable of lasting (and profiting) through the pandemic and beyond.
Put simply, if your business doesn’t have a viable future, you can’t expect an investor to pour money into it.
Look at ways you can improve and streamline your business through the funding you hope to attract. Times are tough for most companies right now, but if you take a proactive approach to your future operations and show a demonstrable plan for getting through short-term hardships, you’ll be much more likely to win favor with investors.
Lending is calculated risk, and you’re never going to find a backer for a business that stands little to no chance of survival. That said, if your business is simply going through a downturn but has a clear future ahead, lenders will see past the immediate problems and will be willing to back you.