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What SMEs Need to Bear in Mind When Planning to Apply for a Loan From a Bank When seeking growth capital, the lines between debt and equity can become blurred, most transactions are made up of a combination of both, but it's important that business plans are tailored to each

By Ben Barbanel

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For any fast-growing business, the need for capital is constant so it is important to work with providers that can keep up with your pace. Unfortunately, this excludes most banks who are notoriously slow and often resort to opaque credit processes where the prospective borrower is left in the dark for months at a time.

Some of the ways in which business owners and those who advise them can hopefully speed up this process and increase their chances of securing a loan from a bank.

1. A Little DD Goes a Long Way

One of the USPs that we're most proud of is our ability to process complex multi-million-pound loans in a fraction of the time it takes larger lenders, but with the same level of rigorous and robust underwriting that you'd find at a private equity firm. However, we can process transactions even faster if the borrower and their advisers prepare a robust due diligence pack with planning consent, development appraisals, valuations, the business plan, sales forecasts etc.

2. Take Time to Build an Excellent Team

Since our launch, we have been focused on one thing – solving the problem of scaling non-standard lending in the UK, backing quality management teams in the process.

3. Cash (flow) is King

Every loan we write it should be driven by the customer's ability to repay it, which starts and finishes with a healthy cash flow forecast

4. Develop a Debt-Specific Business Plan

When seeking growth capital, the lines between debt and equity can become blurred. Most transactions are made up of a combination of both, but it's important that business plans are tailored to each. Equity providers are going to be a lot more concerned with the overall growth strategy and where the company expects to be in 10 years' time when investors will be seeking a return. Debt providers, however, will want to see a business plan that's asset-aware and cash-flow focused and reflects the timeframes they'll be looking at – our the average loan term is two years.

5. Take a Whole-of-Market View

The savviest of businesses develop relationships with multiple financial institutions, using multiple providers to ensure they get the best of every product and service. Don't just assume your clearing bank will give you the best deal or complete a loan faster than another provider, do your research and make sure you've considered all your options.

6. Have Skin in the Game

When seeking growth capital, a big tick for is seeing that the borrower has skin in the game and has invested some of their own money in the project.

Ben Barbanel

Head of Debt Finance, OakNorth

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