Convincing the bank manager that your business is a good risk depends on how well you have thought out your approach. To some extent the bank manager will go on personal impressions and on what he can gather of your previous business experience. If you have already run your own business for a year or two they will already have some evidence to go on in the shape of your accounts.

But if you’re a start-up it’s a different story – the bank will have to take other factors into account to build up a picture of your prospective business and have realistic and thorough projections. They are looking to see if your business will satisfy three main criteria:

• 1.That the bank’s money is secure. New businesses will probably be asked for security.
• 2.That it will generate sufficient cashflow to service the overdraft or loan.
• 3.That you will be able to make profitable use of the business and pay the interest without difficulty.

There is a saying that banks will only lend you money if you don’t need it and you may well think that it’s true. What it really means is that there is no use going to a bank to bail you out of trouble. Businesses in trouble generally need help with management and banks are not in a position to provide this.

As a new business you may only have hopes to go on and the bank manager will need to quantify these, so they will also want to know:

• What your start-up costs are going to be.
• Whether you have worked out what your overheads and direct costs (rent, rates, gas and electricity, depreciation on equipment, staff wages, etc.) are.
• What relation these are going to have to your charges.
• What level of trade you need to achieve to make a profit.