Questions to answer

Whatever source of finance you select, there are steps you should take, and questions you should ask yourself, to ensure that your investors have made a sound decision in supporting you and your idea.

How much do you need?

A bank will want to know why you need need the money. It's no good saying “I need $50,000”.

You'll need to convince them that you have an excellent business idea. They want to be confident that you have the skills and ability to ensure the success of the business. They will assess your strengths, weaknesses and past commercial experience.

To achieve this you will need to present a strong business plan that contains sound financial forecasts. Those two words can seem very intimidating for a small business owner, however, understanding the financial situation of your business is very important, both for you and your financial lender.

What will you do with the money?

Use the operational strategy section of your business plan to provide the lender with this information.

The more comprehensive your business plan, the more likely you are to succeed in securing finance for your business.

When will you repay it?

For an indication as to when you can pay back the money to the lender, use the cash flow forecast in your business plan.

Your cash flow forecast estimates the amount and timing of cash flowing in and out of the business, and calculates the anticipated bank balance at the end of each period.

How will you repay it?

The financier will need to know the expected level of activity (sales) for the next twelve months. Your financial forecast will provide you with this information.

A financier will want to know what sales must be made before the business is making a profit. You will need to know your breakeven point, that is, where the income of the business exactly equals the cost of operating the business.

What will you offer as security?

What assets can you offer as security against the business loan?

Decide what personal and business assets, such as equipment, land and buildings can be used as collateral for a loan. Then, get professional advice from an accountant on the terms of the loan and the security requirements of the lender.

What's next…

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Related Information

Business Briefs to view:
Recovery of a Debt
Applying for Finance

Business Guide to view:
Records Management Tips


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