Applying for business credit is often not as easy as it seems. Banks are becoming stricter when assessing the creditworthiness of your company or project. That is why it is important to be well prepared before you submit an application. In this article we therefore discuss some tips for successfully applying for a business loan.
What is a business loan for?
A business loan can be used with an acute shortage of financial resources to increase the liquidity of your company (think of lenders such as BA Audit and PIN secure). A second application is the purchase of funds with an economic life of more than one year or the financing of movable and immovable property .
Who is a business loan for?
Not everyone can just apply for a business loan. You must be registered with the Dutch government as one of the following companies:
- Sole trader or sole trader
- General partnership (vof)
- Private limited company (eg)
How do you proceed with a credit application?
- Compare providers
- Build a relationship with your bank
- Take care of your administration
- Pay sufficient attention to trust
- Deliver the correct documents
1. Compare providers
Before you make a choice for a particular bank or lender, it is important that you compare the different providers and conditions of business loans. Are you looking for a flexible form of business credit? Or do you prefer long-term financing? Immediate payment? Or payment in installments?
It can also help to view the different interest rates and read customer reviews to get a better picture of customer service and personal service (which is at least as important as the price). That way you can make an informed choice and choose the best approach for your new project or expansion.
2. Build a relationship with your bank
Just as you do not just lend large amounts of money to a stranger, banks also want to know who they are working with before they lend a loan. Everything starts with good preparation and a clear vision of where you currently stand and where you want to go with your company.
The bank wants to know:
- With whom they go into the sea
- What the loan will be for
- How the borrowed money will be earned back and reimbursed
It is important that these matters are communicated in a confidential manner. Therefore, prefer a telephone appointment or a visit to the office. That way you have the best chance of making your plans clear. Moreover, this increases trust between both parties. A crucial factor for good cooperation.
3. Take care of your administration
Make sure your admin office is in perfect order. When substantiating your credit application, you show with concrete figures that you can bear the interest costs and repay the loan.
A second important factor is the calculation of your credit requirement: Ensure that it has been calculated carefully and accurately: it does not make a good impression if you apply for less or more credit than is necessary.
4. Pay attention to trust
Lending money is not only a matter of collateral, but also of trust. An excellent administration and personal application support that trust. Be open in your communication with the lender and do not withhold information. It is better that you are honest about a possible shortage of money in the near future or a difficult customer who refuses to pay than to keep this information secret and to violate trust.
5. Deliver the correct documents
It is important that you provide all the necessary documents for the credit application to make the process as smooth and simple as possible. The precise documents that each lender requires may vary per provider. So always ask exactly which documents you need. It is better that you provide extra documentation than too little. This will only promote the process and possibly even increase confidence.
Documents required in most cases for a business credit application:
- An extract from the Chamber of Commerce
- Profit and loss account and balance sheet for the past two years
- Income tax return / assessment last year
- A prognosis about the current and next year
Information about the investment is also required. Think of:
- Appraisal report or building agreement
- Rental or lease agreement
- Specification and capacity of machine
Banks also often request documents such as:
- Order portfolio
- Stock of finished product
- Inventory work in progress
- Debtor overview
- Business plan
Alternatives for starters
Particularly in the case of small businesses, it often happens that the application is rejected at the bank. This can be very annoying and cause many problems. Reasons for this may be: insufficient confidence in the project, payment arrears, a lack of demonstrable results, etc.
Fortunately, there are a number of alternative forms of business financing if the credit application is refused at the bank, or if you would rather not rely on external financing from a traditional bank.
Crowdfunding is currently on the rise.
Since the financial crisis, confidence in the classical banking world has fallen enormously. People are looking for alternative forms of investing and borrowing money. Due to the growing peer to peer community, the growth of the internet and the increasing trust in online purchases and investments, the trust in peer to peer credit and crowdfunding has also increased enormously. Platforms such as Kickstarter are known worldwide, but also Funding Cirlce and Lender & Spender are examples of lenders who work without a traditional bank and appeal to individual people who all lend a small amount together to achieve the total amount required.
However, this form of business credit requires some extra preparation and a clear business plan. The most important thing about crowdfunding is that you know how to convey the message and make people enthusiastic about your project.
A second alternative is to use the microcredit from uCredit.
A microcredit is a business loan of up to € 50,000 for starting and existing entrepreneurs in small and medium-sized businesses.
uCredit helps people who have an idea and who want to start doing business with that idea.
With this form of business credit, Dutch banks are co-financed by the ministries of Economic Affairs and Social Affairs. That way they can be a little more flexible in approving their projects and you are more likely to get approval for your application.
A third possibility is to request a loan from a private investor (also known as’ Angel Investors’, ‘Venture Capitalists or’ Business Angels’). These are people with enormous capital with whom they invest in young and enthusiastic companies that are able to attract their attention. Private investors are more often prepared to take large risks because they are aware of the potentially large return that a risky investment can generate. With well-developed social skills, a clear vision and a risky business plan, the private investor may be the perfect choice to apply for external financing for your startup.
A last option is to apply for a subsidy from the Dutch government. In some cases, you can get financial support from the state to help your project grow or get started. Consider, for example, environmentally friendly solutions to current problems, a charity project or an improvement of the infrastructure in the city. Be sure to take a look at the website of the Dutch government for more information about subsidies for your company.
Applying for a business loan is a job to take seriously. Be aware of exactly how business financing works, what the requirements are and how you need a clear vision to get external financing for your project, company, expansion or company. So take enough time to come up with a plan and write it out so that you can convince the lender for financial support.