Entrepreneurs who start up in business can often get frustrated with the attitude of their bank to their business. It's understandable enough.... the entrepreneur can visualise the wonderful business that they are going to build, while the bank only see's a lack of revenues and no proof of likely revenues any time soon.

 

Approaching the bank for support before you have an order or any evidence of income is likely to be frustrating. Banks assess risk in a very straightfoward manner and a new start business with no revenues is in many cases too high a risk.

 

If you do secure a loan or overdraft from a bank in your early days it's likely to be Personally Guaranteed or Secured Personally. It's unlikely to be secured against business assets unless you are in a very fortunate position. Personally guaranteeing a loan obliges you to pay back the loan in some way if the business can't whereas securing the loan against a personal asset gives the lender rights over that asset if you fail to pay them back. So be careful - preferably go for a personal guarantee as that at least gives you some flexibility if things go wrong.

 

One other popular option worth checking out is the Small Firms Loan Guarantee Scheme. The SFLG Scheme is specifically for businesses who find it difficult to raise finance or borrow against assets. The scheme protects the lender if things go wrong to the tune of 75% of the loan so the banks exposure is much reduced. As much as £250,000 can be borrowed under the scheme. However, the banks still carry out due diligence on your business and your plans and if they don't meet the banks lending criteria then you wont qualify. However, if you do need bank support talk to your relationship manager and find out what they can do - perhaps an SFLG is worth asking about.