Getting Business Finance:
How to Improve Your Chances of Approval
There’s no doubt about it: capital is critical. Whether you’re managing day-to-day operations or scaling up, you need capital to sustain and grow your SME. Securing funding, however, can feel daunting. That’s why we’ve created this easy guide to getting business finance.
Here is what you need to know, gather, and submit to improve your business loan application.
This guide isn’t a silver bullet that guarantees funding approval. But it will help you avoid common mistakes and give the lender a stronger basis for their decision.
1. Be Clear About Why You Need the Money
Start with the specific problem or opportunity the funding will address.
Are you buying materials for a confirmed order? Covering wages while customers take 60 days to pay? Investing in equipment to increase production?
The clearer the need, the easier it is for a lender to assess the application and consider a suitable funding structure.
For example, a Birmingham manufacturer waiting for payment on a large order may need working capital to buy materials for the next one. If the outstanding invoices are due in 45 days, Selective Invoice Financing could help!
Be ready to explain:
- How much you need.
- What the money will pay for.
- When you need it.
- What the funding will help your business achieve.
Avoid asking for an arbitrary amount. A realistic figure, supported by actual costs or orders, gives your application a stronger foundation.
2. Get Your Financial Information Up to Date
A lender needs an accurate view of your business to decide whether the funding will work for you. Missing figures, outdated accounts, or unexplained discrepancies can delay the process.
Before applying, gather the information relevant to your business and the type of funding you want. This may include:
- 6 months of business bank statements. Most lenders now ask for Open Banking before funding.
- Current figures for outstanding customer invoices and supplier payments.
- Details of existing loans and other financial commitments.
- Your latest filed accounts and tax information, where required.
Check that the figures agree across your records. If your bank statements show regular payments toward an existing loan, for example, make sure your financial information reflects that commitment.
If your figures show a difficult trading period, be prepared to explain why. A major customer may have paid late, or rising costs may have squeezed your margins. Explain what happened and what you have done to address it.
You do not necessarily need perfect accounts or a spotless trading history to secure funding. You do need to present the position honestly and explain anything that might otherwise be unclear.
3. Show How You Expect to Repay the Funding
A business can have strong sales and still struggle to meet its commitments. When money comes in and goes out matters as much as how much you sell.
Prepare a cash flow forecast showing expected receipts, wages, supplier payments, tax liabilities, and existing finance repayments. Include realistic dates rather than assuming every customer will pay on time.
Imagine a Cardiff construction contractor that pays subcontractors and buys materials before receiving payment for completed work. A profitable contract can still strain the bank account if the customer pays several weeks after the contractor’s own bills fall due.
A forecast can help identify that shortfall before it becomes a problem. It also gives a lender a clearer view of when money should arrive and whether the proposed repayments are affordable.
The lender can then assess the risk using the information that actually drives your business.
Top tip:
Research the funding options to see whether you will need to provide security. What type of security is accepted, and do you meet the criteria?
4. Use Realistic Figures, Not Best-Case Projections
Growth forecasts can support an application, particularly if you need finance for equipment or facilities that will increase takings. But be wary of figures that assume everything goes perfectly. That won’t help your case.
Base your projections on evidence: confirmed orders, historical sales, agreed customer terms, or known operating costs.
Allow for delayed payments, rising material costs, and other risks. If you expect revenue to increase, explain what will drive that growth and what additional costs it will bring.
For example, a service provider winning a larger contract may increase turnover, but it could also require an initial outlay for more stock, labour, and transport before it becomes profitable. Your forecast should account for both sides.
You don’t need to predict the future perfectly. You just need to show the lender you understand the costs, risks, and cash needed to support your plans.
5. Choose Funding That Fits the Cash-Flow Problem
Different funding products solve different problems. Applying for a facility that does not match your need can leave you with the wrong repayment structure, even if you qualify.
Consider how and when you’ll use the money, and what you’ll use to repay it.
For example:
- Selective Invoice Financing can release money against specified invoices, helping you cover costs while waiting for those customers to pay.
- Venture Capital or Angel Funding may suit a start-up business that doesn’t have enough trading history to secure a traditional loan.
- A Business Cash Advance is ideal for established companies that need extra capital for the next phase of growth.
- A Merchant Cash Advance suits retailers, hospitality, and other businesses with strong card sales. Repayments are a small, agreed percentage of your daily card takings, so you pay less on quieter days.
Look closely at the funding cost, repayment dates, fees, and any attached conditions.
Make sure the arrangement fits your expected cash flow, rather than locking you into fixed repayments and high interest.
Getting Finance: What to Do Before You Apply
Investigate your options upfront. Don’t apply for everything and hope one thing ‘takes’. That’s time-consuming and stress-inducing.
Once you find the right solution, make sure you can answer these questions before submitting an application.
- What will the funding pay for? Identify the amount and the specific business need.
- How will you repay it? Use realistic cash-flow figures and account for existing commitments.
- Why does this funding structure suit your business? Match the facility to the timing and purpose of the money you need.
You should also be ready to provide supporting documents and answer questions about your trading history.
Approval is never guaranteed. The lender will still need to assess your business, the risks involved and the affordability of the proposed facility. A clear, well-supported application makes it easier to understand your position and reach an informed decision.
Funding: Fuel to Keep Your Business Moving
Sometimes you have a great growth opportunity, but not enough capital to seize it.
We’re entrepreneurs who have faced what you’re facing. We understand real-world business challenges:
- Stalled cash flow.
- Supplier invoices piling up.
- Payroll problems.
- Needing cash to buy the stock to make the cash.
We’ve come out the other side, and we know cash flow problems are solvable.
You don’t have to do it all alone.
Our team is ready to assist if you would like to discuss your options.
Contact us at [email protected] or 0800 1026000.
