Around half of all our business buyers look to secure a bank loan to fund some part of their business purchase. Typically banks will lends up to 70 percent of the final purchase price, although the more commitment you can show, in terms of a down payment, the more favourable the repayments will be.
2014 has certainly seen a growth in the number of business bank loan applications accepted as the UK economy recovers to pre-recession growth levels.
At Intelligent Business Transfer, we have worked with a large number of business buyers to secure bank finance. Below we have included our top five tips to improve your chance of securing bank financing.
Your business plan does not need to be an unnecessarily large document. Keep it simple but informative, covering the following points:
Include your business experience in your business plan and try to relate this to the business you are buying.
This is a very important factor in your application, without this most deals are non starters. It comes down to how much cash you have to put towards the deal. Dependant on sector it could be a minimum of 10% to a 50% requirement. All banks have different requirements. For comparison purposes, for convenience stores banks normally look for a 30% cash contribution.
Consider what the bank loan will be secured against. Banks will generally try to work with you to work out an agreement that will work for both you and the bank.
Although the final point, this is critical. Can your business afford to repay the bank loan back after your individual drawing requirement? Banks will often work with you to ensure that your projections are accurate – it is within their interest to make sure you can afford to repay.
Overall remember banks are actually trying to lend money to SME's and as much as possible they try and support clients buy, develop and grow their businesses.