Small business loans: 5 tips for a successful application

If you’re applying for a loan to help your small business through a tough patch or to expand, there are things you can do to maximise your chances of success.

Follow our tips to help make the process smoother.

How do you apply for a business loan?

In simple terms, there are usually four steps to a loan application:

• you complete an application form
• the lender runs a credit check
• the lender decides whether or not to offer you the loan
• if your application is successful, you can decide whether or not to accept the loan

Five tips for applying for a small business loan

1. Gather all relevant information before you apply

It’s worth pulling together the details you’ll need for your application before you get started, so the process can run as smoothly as possible. Not every business loan application is the same and they can require different things. 

But you’re likely to need most of these things for a small business loan applications:

• how much you’re asking for and why you need it
• your business plan
• your business bank statements
• details of your profits and losses
• cashflow forecast 
• your balance sheet
• your personal details and proof of address 
• some form of identification
• a copy of your visa (if you’re not a UK resident)
• historic financial accounts for your business

You’ll typically need to outline how long it’ll be before you pay back the loan too. The time frame you can borrow varies, but most lenders average between one and five years. 

So it’s good to have a length of time in mind when you’re applying for your loan. 

2. Build or maintain good credit history

Banks like to see some proof that you’ve borrowed money before and have paid it back on time. That’s why having a good credit score will make a loan application easier. 

Getting yourself on the electoral register gives lenders a way of checking your name and address history. They need this information to confirm you are who you say you are before they give you any money.

You can use a credit score service like Experian or ClearScore to keep on top of any changes to your credit rating and ways you can improve your score.

3. Pay close attention to detail on your application

The smallest mistake or missing detail on your application could be the difference between getting your loan application approved or declined. So make sure you read everything again to double check the details before you click ‘submit’.

4. Avoid multiple applications at once

If you want to see what sort of loan amount and interest rate you could get, use a calculator first. Otherwise it could look to prospective lenders like you’re searching around in a struggle to get approval for your loan.

You can try Experian, Funding Circle, Start Up Loans. Or your own business banking provider’s website may have a calculator.

5. Check whether you’re eligible for grants

Before you go down the route of borrowing money for your small business that you’ll have to pay back at some point, it’s worth checking whether any grants are available to you. Funding your business with financing you don’t have to pay back gives you one less financial burden to think about.

Read our article on grants for small businesses to find out how and where to start your search.

More guides for small business owners

• A guide to small business grants in the UK and how to apply
• Self-employed tax deductible expenses: what can I claim?
• Best business bank account
• What is public liability insurance?

What are your tips for getting a loan approved? Let us know in the comments section.