What information does your bank require for a loan facility application?

The best advice we can give you is to try and run your business without loans and debt. That’s because the interest and fees on a loan facility, if used over a longish period, will cost a lot more than the capital amount of the loan. If you have any doubts about this, ask your accounting person to do a spreadsheet calculation for you.

The only time that it’s really justified to apply for a bank loan is if your business is so profitable that the return you earn on the money invested is higher than the bank’s loan interest rate. So, if the loan rate is 10% but you can earn 12% or more on the money invested, then go ahead.

Most companies apply for an overdraft because they don’t have enough cash at the end of the month to pay salaries or those creditors who threaten to stop the supply of essential raw materials. Not a good financial situation to be in!

And don’t, for heaven’s sake, be tempted to use your housing bond or your pension to fund the company – that’s a sure and quick way into trouble.

OK, so you feel you can make good use of the money and you decide to apply for that short-term overdraft or loan facility. Here is a list of the documentation your bank will ask for:

Yes, when you look at this formidable list, you will wonder whether it’s worth it? Well, that’s where an accredited business advisor can help you by putting this all together for you.


Garth Trumble

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