Bank loans and Financing your Business

The suitability of a bank loan for your business depends on several determinants such as the amount and duration of the loan, whether you will incur a simple interest or compound interest, the time period between payments according to the repayment schedule imposed by the bank (one or several payments), in addition to the grace period (repayment break)  that the bank grants to the client after granting the financing, but you must take into account that the bank charges additional interest for this period.

Here are some tips to follow when applying for bank financing:

  • Collect information about banks to select the bank that best suits your needs
  • Try to meet the right person (credit officer). It is preferable to call and request an appointment with  the credit manager, but in case that was not possible, ask to meet a credit officer.
  • Try not to give information over the phone, but through a personal interview.
  • Try, if possible, to get a recommendation from one of the bank’s clients
  • If your application is rejected by a bank, it does not mean that all banks will necessarily reject your financing application.
  • Often the credit officer you meet tells you that your project cannot be funded, because they do not want to work on a small loan application.
  • To make life easier for the credit officer, be provided with all the relevant documentation at the interview
  • In the event that the credit officer requests papers and documents, do not hesitate to fulfil their requests and remember that you will be given the financing based on these documents
  • Keep your action plan in mind and be prepared for some critical questions

The bank’s credit officer may also ask you many questions, to which your answer must be  specific and clear, including:

  • What is the purpose of funding?
  • What is the required amount?
  • What is the required period for financing?
  • What is the source of reimbursement?
  • If the project fails, what is the alternative source of payment?

Simply put, the bank may reject your request for financing due to various reasons, including:

  • Doubting the client’s ability to pay
  • Doubting the client’s ability to manage the project
  • Lack of clarity in terms of project feasibility (project profitability)
  • Obstacles to project implementation
  • Suspicion of lack of transparency on the part of the client

Finally, you should take into account some undeclared expenses such as:

  • Stamp duty on contracts
  • File study fees
  • Account fees
  • Highest balance charges
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