Banks want to make loans to businesses which are solvent and profitable. They are generally risk averse, and consider lending to one-person operations or new businesses without solid track records as high risk. If you get sick or hurt who will carry on your business?

Banks will decide against poor lending risks and ill-prepared or ill-conceived proposals for borrowing. Conscientious planning and management, and accurate financial forecasts are essential if you want to improve your chances of securing a bank loan.

Each financial institution has its own criteria for assessing applications. Find out what your bank requires, but generally you will need to provide a comprehensive and well supported business plan, and collateral to match the value of the loan.

Many banks use an initial basic assessment known as the ‘3Cs': character, cash flow, and collateral. How do you measure up to these:

• Character: relates to your past commercial experience, your skills and abilities. The bank manager will assess whether you can actually do what you want to do.

• Cash flow: refers to the cash “ins” and “outs” of the business which should be realistic, showing that sufficient funds can be generated to cover any loan requirements.

• Collateral: refers to what you are offering as security against any potential loss by the bank.

Both the lender and the borrower face risks when money is borrowed. The lender's risk is that the loan won't be repaid, or will be paid late, or that it will cost a lot of time and money to collect payment. The borrower's risk is that they won't be able to make the repayments, and the lender will call in their security, or sue for recovery of the monies outstanding.

The Business Loan Finder can help you find and compare loan options for your business. You can type in the amount of money you need to borrow, specify whether you need it upfront or on call, decide on the type of security you want to provide (residential, non-residential or none at all) and the Business Loan Finder takes care of finding the loans that meet your needs.

With up-to-date information supplied by InfoChoice, the Business Loan Finder is a useful guide to the business finance options available from banks and other lenders.

It is strongly recommended you seek professional advice from your business advisor and lawyer before entering into any contract.

What's next…

• Check out the How to get a business loan workshop
• Work on your business plan
• Is your business eligible for government assistance or a grant?

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