5 Easy Steps to Improve your Chances of a Business Loan

50 poundsIt’s never easy to get someone to loan you money. For women, it can be especially hard. Even in the 21st century it can be more difficult for a woman to receive business funding than it is for a man. However, there are many opportunities available if you are prepared to persevere and believe in your dream.

The Obstacle

Research by the Women’s Enterprise Task Force shows that women are likely to be approved for less money when trying to fund their business.  A business owned by a woman accesses an average of only £10,000 funding, compared to £15,000 for men.

The theories for why this is so vary widely. For a start, women are often more cautious and look for lower amounts when they start a business. Women’s businesses are more likely to be in the service sector and retail, with a different funding profile to the sectors men are more likely to start in. Sometimes a woman has less income than a man before starting a business, lowering the security she’s able to offer against larger loans. While studies have shown that bankers don’t doubt a woman’s ability to repay, it can still be a challenge for women to find funding for their business ventures.

The Solution

There are a number of resources online discussing how entrepreneurs – especially women – can get funding. One of the best is startups.co.uk, a site that discusses various funding options from bank loans to grants. And Prowess 2.0 produces an excellent free guide to the various sources of finance for women in business.

If you are looking for a small business loan from a bank, there are a number of steps you can take to make sure the bank takes you seriously.  Here are five easy steps to follow in looking for a business loan.

1.     Know what you are looking for. If you don’t have a formal business plan, create one before you go to your bank. Know exactly how much you need and what you will use it for. It’s important not to take on too large of a loan or too small of one. A large loan may overburden your business earnings, and too small a loan will require you to go back for additional funding.

 2.     Know your business potential. One of the key elements to any loan is the likelihood that it will be paid back. If you are very knowledgeable about the market, your competitors, your business plan, and potential income, you will stand a good chance of impressing the bank and increasing your possibility of approval.

 3.     Check different banks and financial institutions. The bank you use for your daily accounts may not be the best option when looking for a loan. You want to seek out information about who is offering the best terms. Fellow business owners are great sources of advice.

 4.     Know your loan-worthiness. It’s important to know what your credit rating is, as well as what your assets and income are. In addition, have a good idea about potential income from your business. All of this information will help you know whether you will likely qualify for the loan you want.

 5.     Consider other sources of funding. For smaller financial needs, grants or government aid may be available. In addition, you may want to look for venture capital, crowd-funding, or micro-loans.

Being a woman can make it a bit harder to secure a loan. However, rather than worrying about how unfair it is, use the extra energy to prepare yourself far better than your business counterparts – male or female. This preparation will show your business savvy and open up funding opportunities.

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