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Mistakes to avoid when applying for a professional loan

When you want to start your own business, applying for a bank loan is often an essential step. To do this, you should be aware of different criteria to increase your chances of accessing a business loan.

A necessary step

Bank credit consists of making funds available to a company to help it carry out a project. In return for this loan, the bank recovers money in the form of interest. There are different types of bank loans that can influence loan conditions and the amount of interest.

When embarking on a business venture or wanting to invest, looking for a loan can sometimes be daunting. Also, many neophyte entrepreneurs fear their first appointment at a banking organization. Indeed, Financing a business requires the acquisition of sufficient financial resources. Even when there is a contribution, it is quite rare to escape from external financing methods.

Usually, it is the trustworthy companies that get the best rates. Whatever your sector, getting a loan will be quite feasible to the extent that you justify a detailed and serious record.

A rigorous preparation

Obtaining a bank loan is a great number of advantages to developing a business. Depending on the needs, it can supply cash, allow the purchase of a business or the financing of new equipment.

In Luxembourg, as in many European countries, banks will not lend without a well-written file. The banker will appreciate a professional approach likely to interest him and to inspire confidence. Therefore, the candidate will have to favor a clear and perfectly structured presentation. It will also be necessary to provide a quality business plan, in which you will be able to detail the activity of the company and the envisaged strategy.

The objective is to discuss the target market, the profile of your target and the characteristics of the product or services sold. This part can also be discussed with the banker to demonstrate the credibility of your project. It will detail the human or material resources needed and the amount you would like to have.

A good business plan addresses both the legal structure, the financial forecast and the financing plan. It must obligatorily present the course of the candidate and the amount of the starting capital. To apply for a loan easily, you will have to pay particular attention to the financial part and provide strong guarantees to your interlocutor.

What help outside the banks?

One of the most common mistakes is to limit oneself to the only bank loan to finance one's professional project. Although it is indispensable, it can be completed by other equally interesting solutions. Before you start your project, start by taking stock of the amount of your own funds. This step can include your savings, but also the equipment (vehicle, office, machinery) already in your possession.

As part of the development of an SME, many help can be provided by the Chamber of Commerce . This could be digitalization aids or participation in a craft fair, for example. For the creation or takeover of an enterprise, there is an "initial investment" aid scheme, which needs to be established in Luxembourg and to offer viable guarantees.

Note that the National Society of Credit and Investment (SNCI) It also allows you to obtain investment or innovation loans, export credits or start-up loans to the company. Finally, do not underestimate collaborative financing, better known as crowdfunding. Every citizen who recognizes himself in your project can indeed support you financially, in exchange or not for a counterpart.

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Posted on November 29, 2018.



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