Approaching the bank for a start up loan....

SarahLou

Hello everyone. Having posted on these forums for quite some time now, I thought I'd ask this question as I've never had any experience with this side of things before. Its simple:

What do I need to take with me to the bank to discuss getting a start up business loan?

As an off-shoot from that question, I would also love it if someone could advise me on:
a. which bank(s) would you recommend for small start up loans?
b. how can one ensure that it doesn't get secured to the house/mortgate? (Hoping the business would be a success, obviously, but I don't want to risk losing the house if it all goes horribly wrong!)
and finally:
c. is it OK for me to go to the bank before sourcing any premises? (I've extensively looked but haven't done much else on that score yet as it would depend on the loan before I could start up the busines any way so I presume I'm doing it in the right order?)

steve1980

You will need to:

Ask!

Just call your bank up and say I'm looking to take out a start up loan and would like to speak to someone about it.

SarahLou

Hehehe, good plan! I was hoping someone might've done something similar recently too so I sound a bit more savvy when I go/phone up, lol!

steve1980

To be honest, every time I phone Barclays up (business account) they are always trying to get me to take something or other, whether it be an overdraft, company credit card, loan or a matching pen.

Alot of the people on the end of the phone all get a little something if they manage to sign you up to something.

If you have a business bank account then speak to them first.

paulwf

One thing I'd advise, which I didn't think about at the time but it makes sense now, is to not approach the bank you most want first. Instead practice your pitch on a bank you are less interested in so you'll be polished when it comes to the important pitch.

The way I secured a loan was to call up and have a chat with the call centre then had a proper meeting with my local business manager. I made it clear I just wanted an informal chat and used that to find out exactly what they wanted from the business plan so I could tailor it to suit their requirements. I then went away and did my business plan and it got escalated to the regional team when the serious meetings then took place.

I use HSBC for my banking and love them, they all drag their feet though so apply in plenty of time before you need it. I would suggest doing the Business Link courses and do any other courses, qualifications or work experience you can, any brownie points you have are a bonus.

Any bank will want to see you putting about a third of the capital in yourself. If it is any less than 25% they'll get twitchy as your not putting enough in yourself. As to security - I don't know of any way of not risking your assets. Even with a limited company you'll have to take out a personal guarantee. Banks have thought about this and will make sure their loan is as risk free as possible to them, they aren't stupid. Anyway, if you are taking on premises you'll have to personally guarantee the lease in most cases so you could end up paying rent for a very long time even if you close the business. Basically even without a loan taking on premises can be a huge risk so think very carefully before you proceed, you could well end up with nothing left. Only you can balance risk v reward.

You are right to go to the bank before sourcing premises, it sounds like you've done the right thing with your research. In my business plan I put the details of 3 suitable premises so the bank could see something concrete. Personally I wouldn't approach landlords until you have funding agreed as they'll only do a deal if there is a serious offer on the table. There is a bit of dancing around though trying to get the premises and the loan tied up at the same time so its not strictly one stage before the other.

Savvy_Sue

SarahLou wrote: »

Hehehe, good plan! I was hoping someone might've done something similar recently too so I sound a bit more savvy when I go/phone up, lol!

I think it all depends on your business plan: you really need to get that polished at an early stage, because no-one will look at you without that.

but I think you've had some very good advice here.