Introduction
For many business owners, how to secure business funding is one of the biggest questions they face. The majority go to their bank, but if they are unable to find support there, they often give up. This is where using a commercial finance broker can really help business owners. As we work with a wide range of lenders, we can usually find a lender to suit your circumstances.
To improve your chance of business loan approval, there are a few things you can do before you start your borrowing journey:
Check Your Personal Credit File
Although you are borrowing as a limited company, you are still the director and responsible for ensuring the loan is repaid. Most lenders require a personal guarantee, so they want to ensure it stands up to scrutiny. Missed mortgage payments, personal CCJs, or defaults can lead to declines even if your business is very strong.
💡 Action: Correct any issues before you apply, and let your broker know in advance so they can target the right lenders who will "take a view" on personal credit.
Respect Your Bank Account
Lenders need to see that repayments are likely to be made; returned payments cast doubt on this. Check for any returned items—if they are due to timing issues, adjust your direct debit or debtor payment dates to keep them under control.
Furthermore, keep business and personal expenses entirely separate. Running personal expenses (like weekly shopping or streaming subscriptions) through the business can turn a "maybe" into a "no" if other risks exist. Take what you need cleanly as a salary or dividend.
Think About the Short, Medium, and Long Term
If you intend to sell your business in 3 years, a 5-year loan isn't the right fit. Don't let immediate needs obscure future realities. If you take a short-term cash flow loan to buy stock, consider what happens when you need more stock—will the first be paid off, or will you stack a damaging second loan? An experienced finance broker can help align your lending type with your timeline.
Speak to Your Accountant and Bookkeeper
You will likely need management accounts or draft accounts for your previous financial year. Speak to your finance team early to figure out their production timescales. They may also spot a potential issue or tax-efficient solution you haven't considered.
Speak to Your Husband, Wife, or Partner
Because most lenders require a personal guarantee, it is highly worthwhile ensuring your loved ones understand what is happening. This is vital if you are looking at secured lenders; if you use a jointly owned house as security, the other party must legally consent to a charge being placed. Have this conversation before applications start, not when it's too late.
What lenders look for:
In short, an application that fits their criteria. These vary across the different lenders, products and risk appetites. One lenders’ automatic decline will be another lenders’ bread and butter client. Understanding the points above and taking steps to correct any issues before speaking to lenders can help with:
- Targeting the right lender for your business. This means less declines, and fewer unnecessary personal searches being carried out.
- Targeting the right cash flow facility
- Speeding up the application process
- Giving you more clarity as a business owner
At Finance My Business, we help UK business owners understand their funding options in plain English. No jargon. No pressure. Just clear guidance.
If you want to explore whether selective invoice finance is right for your business, we’ll walk you through it and compare the best options for your situation.