Q: I have a bad credit history and am having difficulty opening a business bank account for my limited company. What else can I do?
Sep 27 2006
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Raising finance can be a long and difficult process, even for those with a good credit history. To put yourself in the best position possible, ensure that you have fully prepared your case before meeting with potential sources of finance such as your bank manager.
A detailed business plan is essential as this will demonstrate your understanding of how the business will grow, the associated risks and the behaviour of your market. The plan will also show how your sales aspirations are deliverable and that even if your do not achieve 100 per cent of your sales the business can survive. Be prepared to answer tough questions about the reasons behind your poor credit history and show that you have considered what has gone wrong in the past and how to avoid these pitfalls in the future. Click here for top tips on writing a business plan.
Another avenue to consider is the Small Firms Loan Guarantee scheme. This government backed scheme is available to small firms that do not have security or a track record. The guarantee covers 75 per cent of a loan of up to £250,000 for established and start-up businesses. To be eligible, you must be a UK business operating for less than five years with an annual turnover of no more than £5.6 million, and you must have been turned down for a conventional loan. Visit www.sbs.gov.uk for further information.
One further option, if your business has high growth potential is contacting a ‘business angel’. Business angels are wealthy, entrepreneurial individuals who provide capital in return for a proportion of your company's shares. They take a high personal risk in the expectation of owning part of a growing and successful business.
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