6 Questions Lenders Will Ask You When You Need a Business Loan:
Getting pre-selected for business funding in South Africa isn’t unobtainable, even though it may seem that way – especially if you’ve been rejected before.
You just need to understand that lenders are in business too, and they need to be certain before they give you finance. So, even though you might think their requirements are “too much”, you need to remember that you’re the one who has to prove yourself to them. You’re the one who needs to prove why you deserve funding, and how trustworthy you are.
And, gaining those two things or a loan agreement isn’t difficult. This article will help you tackle the tough questions before you go to the interview. So, carry on reading to find out how you can get a business loan and all the questions you need to prepare for.
But, before we get to the questions, you need to know how you can upsell your business to ensure you get the opportunity to meet with a financial advisor. Then, you will be able to discuss the loan agreement and get the opportunity to answer these questions.
Firstly, you need to know what your business’s credit score is and whether you qualify for loans. And you need to have all the necessary documents which are specified on the lender’s website. Knowing these two things is the first step to getting a YES from the lender.
So, now that we have established what you need to get pre-selected, let’s get to the six questions the lender will ask you.
1. Why does your business need this loan?
One of the first questions any lender will ask is; why do you need this loan? This question is easy as you’re talking about your company, and you know why your idea deserves to be funded. But, if you wish to elaborate further, then you should bring your business plan along.
A business plan is fundamental in getting money raised for your business, and it will make lenders take you seriously. Not only will it show them how serious you are and that you know exactly what you want, but it will also give them a detailed explanation of where the money is going and how much you need. Having the lender see what your vision is for your business can help them get a full picture, which will help your cause.
Remember that your business plan doesn’t need to be big. You can have a small version that has the important information you want the lender to know. This also keeps you on the safe side because many financial institutions ask to see your business plan, so taking it with you can help you in more ways than one.
2. How much money do you need to borrow?
This may seem like an easy question, but when faced with a lender, you might get flabbergasted. Prepare for this question so that you aren’t thrown off. More importantly, don’t be vague about how much your business needs. Be assertive when you answer, as it will make the advisor see that you are honest. It will help create trust between the two of you.
And, remember that your business needs this loan; it isn’t merely for pleasure. So, trust yourself and your answer. It will also help to put the advisor at ease. And, if you feel intimidated, try practising saying the number out loud a few times before you go to the interview. That may help you gain your confidence back.
If you need more information or you want to play around with numbers, take a look at the lender’s business finance calculator online. This doesn’t necessarily mean you’re going to get this amount, but it can help you get an idea of how much your monthly payments will be.
3. Tell us more about your business?
Now, this is the time to wow your potential credit provider because you’re talking about YOUR company. So, be confident and make sure they hear how passionate you are about your business. Lenders will also want to know a few questions: what your average turnover is, how long your business has been operating, whether you’ve ever defaulted on a payment before, the industry your business is in, and when do you need financing.
When answering questions, even the awkward ones make sure you’re honest and transparent. If there is something bad, it would be better if they find it out from you rather than during their investigation. For example, if you have defaulted on a payment in the past, it is better if you disclose this information from the onset. Yes, it may affect your chances, but at least lenders will see that you’re honest and that can also work in your favour.
4. Can we look at your business’s financial details?
When a lender asks this question, always say yes. Saying no may get your application denied. But, to be on the safe side, it will be helpful if you go through your business’s financials to ensure everything is as it should be. The lender will most likely want to see the following:
- Credit card accounts
- Investment accounts
- Current and past loans
- Bank account (including information of any co-owners)
- Tax number
- Contact information
5. Can we evaluate your account payables and receivables?
Before you’re selected for business finance, lenders will ask to see your account payables and receivables. Again, this is a question you need to say yes to because it will help you get your funding. To make yourself a favourable candidate, present the documents before they ask for them. This will help your plea to get funding. Your receivable includes all your accounts’ information as they will need to check their credit, sales and your payment history.
And, your payables will include the information on your receivables and your credit references, and accounts that sell to your business, so that they can see how well you pay your accounts. Your account payables and receivables will work as a report of your business transactions showing how you run your business.
6. Can you review your personal financial details?
Your lender will want to review your personal financial details so they can get an idea whether you’re a high-risk borrower or not. The lender will want to see your net worth, for example, your personal assets value. These assets include your car, house and investment accounts. They will also want to see what your liabilities are. This can be anything from your credit card debt to mortgage or any outstanding loan. If you have co-founders, they will also have to provide the lender with their personal financial details before the application process can continue.
Are you ready?
Applying and going to interviews for financing can be a daunting process, but it is something that needs to be done. So, be confident and transparent during the interviewing process. Because at the end of the day, it’s about proving your company’s worth and your trustworthiness. Yes, it may be intimidating in the beginning but always keep the end goal in mind, and remember that you’re doing this to grow your business. And, the only way to do that steps out of your comfort zone and show lenders why you’re the best candidate.
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