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How To Qualify For a Competitive Business Loan

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Applying for a business loan can be nerve-wracking, especially if your expansion, cash flow or start-up plans hinge on getting affordable commercial finance.

One of the key factors is evidencing your trading history, so having all of your documents and accounts ready to answer any questions can streamline the application.

It’s also crucial to understand the lender’s criteria before you apply since any guidelines may mean that you could automatically be rejected – adding time and stress to the task of finding competitive business lending.

Today, our mortgage brokers summarises some of the important information you need to know before you apply for a business loan, including tips about what a lender is looking for when assessing your application.

Credit Score Assessments For Business Loans

While your past trading figures may not be indicative of the future, they’re a cornerstone of the evaluation. Business lenders prefer companies and owners to have healthy credit scores to mitigate the perceived risk of the loan.

Before applying, we’d recommend you:

  • Request copies of your credit report (and those of other directors or shareholders involved with the application) – the three big UK credit bureaus all use slightly different calculation methods, so accessing them all is advisable.
  • Check your score, with context about whether it’s very good, good, average or poor, and address any errors or inconsistencies to bring things up to date.
  • Look to improve your score where possible by repaying small debts, closing unused credit accounts and paying bills on time.

Companies can also boost their credit record by ensuring their data is accurate and updated. They can even include more vendor trading accounts on their credit record to showcase financial responsibility and on-time payments.

Business Loan Annual Revenue Requirements

The next thing a business loan provider will assess is how much your company makes a year and whether there are notable trends in your sales volumes and cash flow management.

Providing copies of financial statements for the last two years will help a lender run through quick assessments, including looking at your net assets, so a balance sheet is important.

Lenders commonly also ask for copies of your bank statements, which means they can get an idea about your cash flow and whether that matches the performance shown on your financial accounts.

If you have all of this information ready or include it with the application, it makes the lender’s job easier. You’ll likely get a faster response if the business loan provider isn’t chasing up more details from their applicant.

Producing a Business Plan To Support a Loan Application

Businesses applying for a loan need to explain what they’ll use the financing for and the plans for company growth.

That means being able to discuss and answer questions about:

  • Anticipated turnover and profits.
  • How you will utilise the loan to support the business.
  • Company performance against competitors.
  • Changes to your trading plans.

Projected financial statements are essential to produce an effective business plan. You can include additional context, such as background details about senior managers and how they will use those skills to contribute.

Security Requirements for UK Business Loans

Finally, you’ll need to evidence what sort of security you have available to mitigate the lender’s risk.

Collateral or security means leveraging a business asset against the business loan, so the lender has the option of calling in ownership of that asset if you fail to make repayments or default badly on your business loan.

Many lenders will ask for security against an asset, such as machinery, property or a business debtor account, and may require a director’s personal guarantee.

In that situation, we’d suggest seeking independent advice since, while personal guarantees are common, they do mean that you run the risk of losing your home or needing to repay the business obligations if the company cannot repay its debts.

Comparing Alternative Business Loan Products

Note that there are multiple alternative types of business loans, such as invoice finance, which can be preferable, and lower cost than a conventional loan account.

That form of lending means that the business loan provider offers a line of credit balanced against your invoices issued to clients with a stable credit history.

Usually, the client pays their invoices through a factoring account. You can draw down up to around 80% of the invoice value before it is paid without needing additional security since the debt is secured against the client’s payments.

Applying for a business loan means allowing a lender access into every corner of your business history, finances, expectations and operations, so knowing what to anticipate and having an understanding of the requirements can be invaluable.

For more advice about finding a business loan, applying successfully, or comparing alternative borrowing products, please contact the experts at Revolution Brokers on 0330 304 3040 or via email at

About the author


Revolution Brokers

Professional and experienced Mortgage broker over 5 years in the finance industry helping people for bad credit, investment homes and with commercial or personal finance.