You need to explore all available sources of finance for your new business idea. You have three main sources (see previous article on 10 October):
- Your own investment (equity)
- Loans (debt) including bank finance
- You may qualify for other supports such as grants
All Irish banks loan application processes have been streamlined and are broadly similar – so this guidance should apply whatever bank you use. In addition the work involved in applying for a bank loan can be used to apply for other sources of finance such as your local Enterprise Board.
The first thing you need to do regardless of who you are asking for finance is to sell yourself and your business idea. This is best done by your business plan (covered earlier in this series).
A well-drafted business plan will tell the story of your idea – it will give a clear picture of the strengths and weaknesses, the opportunity, the market and any challenges you will face in delivering on your goals. Once you have your business plan drafted –
- Contact your bank: Before you apply for anything talk to your bank and get in touch with the person who will be handling your application. Tell them in summary what your plans are, how much money you are looking for and ask them to take you through the application form.
- Revisit your business plan and make sure it gives a clear and reasonable picture of exactly what you wish to achieve. Pay particular attention to the financial section, this will need to forecast at least the next three years. If a bank is going to lend you money – it will want to be repaid the loan plus interest.
Does your business create enough cash from sales to repay the loan? Does it have the ability to do so if sales are less than you have estimated?
- Additional information – not in your business plan: The bank will look for the following information in addition to the business plan and application form:
i. Profile of any assets such as property, shares, cars you own
ii. Profile of any loans you already have including mortgage, car loans
iii. Tax Clearance Certificate
iv. Security – A list of any security you can provide e.g. property, shares, personal guarantees and/or potential guarantors and security details.
- Meeting with bank: Once you have your information together meet with your contact in the bank. Ideally give them the information in advance of the meeting. When you meet, sell your idea and your ability to repay the loan being asked for. Remember the bank will support only those businesses that they believe will repay them and have the potential to become a long term (fee paying) customer.