There are several sources for funding your small or medium scale business, but one of the most often used sources for financing your dream project or business is via bank loan. It’s a tricky process as many entrepreneurs have had their applications turned down for one reason or the other. It is therefore important that we understand the rudiment and background behind bank loans and how we can greatly increase our application success.
Package your Application very well
This is one of the reasons why more than 40% of bank loan applications are rejected. Some of the applications come with incomplete documentations. Be sure your business is well conceived and that you have carried due diligence before approaching your banker
Ensure your business idea falls within the bank priority list
Every commercial bank usually have priority list of business or project they allocate loan facilities. You can obtain this important information from the bank before initiating your loan process. As a clue, most commercial banks are favorably disposed to individuals who apply for loan facility to help set up Agriculture and Allied business.
Be 100% sure of your business idea
It is absolutely important that you understand the fundamentals of your business idea. This is usually included in your business plan. Most banks usually ask series of questions on your business plan. You must be ready to defend every loan facility you are requesting for.
Dress decently when visiting the bank
Your dressing during bank visitation must be absolutely on point, because the bank won’t want to risk their funds on someone who appears so shabby and unkempt. Be well dressed and well groomed. Your confidence level must be high in appearance, speech and body language. It must however be noted that your dressing alone cannot secure you a loan facility. Putting on a nice suit without a solid business plan may not translate to your loan application receiving a positive response.
Start from top down
To increase your success rate, it is important that you start your loan process by going first to the bank Manager. Most times, lower cadre officers can frustrate the process. When lower officers understand that the bank Manager is already aware of the application, such stumbling blocks are removed.
Insist on knowing the requirement and get it printed out
I once had a colleague of mine who applied for a loan in a popular commercial bank without understanding the conditions attached. He ended up paying huge interest rates via hidden charges. Ensure that the bank charges and interest rate is well spelt out. Negotiate for the least interest rate possible.
Submit application early enough
Most banks usually encourage loan applications at the beginning of the year. Submission is usually not successfully processed during the fourth quarter of the year as the bank financial year is already rounding up.
Complete all documents diligently without lying
To enable your application move faster, it is usually important to complete each loan documents in a professional way and attach relevant requirements for initial processing of the loan application.
Use a bank that you already operating an account with
Using a commercial bank that you’ve already been operating an account with will help boost your chances of securing a loan facility, especially if it’s a current account and your present employer are will to endorse the loan application. It’s a lot easier compared to approaching a bank where you have no previous relationship.
In summary, every loan applicant must understand that bank requirements differ from bank to bank. The type of loan you applying for, could also alter the bank condition and requirements. You have a choice between short term, medium term or long term loan. After the bank loan is finally approved, it is wise you read the terms and condition thoroughly before appending your signature to the form.