Business 16 www.aftermarketonline.net SEPTEMBER 2025 How to ensure your business is ‘loan ready’ Joe Phelan, money.co.uk business loans expert, offers advice on how lenders assess small firms in 2025 What stands between your small business and its next stage of growth? Often, it’s access to funding. The capital to invest in new equipment, hire skilled talent, or expand into fresh markets can be a game changer. And, for many enterprises, business loans are the most direct and effective way to secure that crucial investment. But while applying for a loan may be simple, getting approved isn’t always as straightforward. Lenders take a broad, datadriven view when assessing applications, looking at everything from your credit score to your cash flow and business plan. But ultimately, it comes down to risk. They want to be confident you can repay what you borrow. Here’s what lenders are really looking for — and how to get ahead before you apply. Lenders want a clear picture of your business’s financial health. Expect to provide up-to-date records, including your profit and loss statement, balance sheet, and cash flow forecast. Make sure your bookkeeping is watertight. Consider working with an accountant or using cloud accounting software for clean reports. Double-check your Companies House filings and ensure accounts are up to date. Business account history How you manage your business bank account matters. Lenders will review your account to assess cash flow stability, income patterns, and your ability to manage expenses. If you’re still using a personal account for business transactions, maybe it’s time to switch to a dedicated business account. This not only looks more professional, but helps lenders assess your finances more accurately. Know and improve your credit score Both your personal and business credit scores can impact your loan application. Missed payments, county court judgments, or a lack of credit history could raise red flags. Check your credit score regularly. If it is lower than you’d like, start building it by paying bills on time, reducing debt, and avoiding unnecessary credit applications. Clear plan for funds Lenders don’t just want to know if you can repay a loan — they also want to know why you need it, and how it will help your business grow. A strong, well-thought-out funding plan demonstrates purpose, strategy, and intent. Outline exactly how much you want to borrow, how it will be spent, and what kind of return or impact it’s expected to deliver. This could be part of a wider business plan or presented as a standalone proposal. Debt-to-income ratio Your ability to repay a loan is a key part of any credit decision. Lenders will calculate your debt service coverage ratio (DSCR) or similar metrics to ensure your business generates enough income to cover repayments. As a rule of thumb, aim for a DSCR of 1.25 or above, meaning your income is at least 25% higher than your debt obligations. If you’re not quite there, it might be worth delaying your application to improve profitability or reduce liabilities. Your business structure Generally, limited companies have access to a wider range of lending options compared to sole traders, who may be assessed more heavily on their personal creditworthiness. If you’re currently operating as a sole trader, it may be worth exploring whether incorporating could open up better funding opportunities. Preparation pays In a competitive lending landscape, being loan ready is about more than optimism — it’s about being organised, strategic, and financially savvy. To see your loan option, use our free tool (https://bit. ly/46wOjde) to check your eligibility and compare offers matched to your business needs, with no impact on your credit score. The number of private sector businesses in the UK at the start of 2024 was 5.5 million, of which 5.45 million had up to 49 employees, according to the Department for Business & Trade. The repair of cars and motorcycles, together with wholesale and retail trade, was the UK industrial sector with the highest SME turnover (35%) and employment (15%) as of the start of 2024.
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