When applying for business finance, remember lenders are people too
10 July 2019
No matter what type of business financing you’re planning to go for, the approach may be nerve-wracking. We can’t stop your knees from knocking, but we can give you some basic principles to consider as you prepare…
Whether you’re kicking off a long application process at the bank, polishing your business plan for P2P or alternative financing, or preparing personal appeals from crowdfunding or friends, pretty much all lenders have a few things in common.
First of all, they want to get something back – or if you prefer, get a return on their investment.
That return will vary: a business lender will want to collect interest, whereas hopefully friends and family will be happy with their money back, your business secure, and freebies for the foreseeable future…
But professional lenders focus on minimising the risk to their capital (or getting more than usual back, for higher-risk opportunities). If your business fails, their money will be at risk. They will want to gauge your business’s potential.
You need to convince them that it’s viable and has a bright future. If you’ve developed your business plan realistically up to now, that’s simple.
So, if you have a snappy, realistic plan, you should be off to a flying start. Just bear in mind:
Everyone hates to lose. Much more than they love to win.
It might not sound logical, but it’s true. Why? Let’s go back to the fact that lenders are people. Where there’s people, there’s psychology. And one psychological concept that’s important to behavioural economics is called “loss aversion.”
If you lose £5, you’ll feel twice as strongly about it as you would if you found £5.
But why? If we were all completely rational, a gain would make us just as happy as we would be sad to lose the same amount. But this isn’t what happens. In fact, we’ll normally go much further to avoid a loss than we would to secure a win of similar size.
So, lenders of every kind simply hate to lose. Which means that they want reassurance that they won’t lose, much more than reassurance that they’ll win. That’s important, because it may be the opposite way round to your focus up until now.
The flipside of finance
We’ve eliminated red tape from our own business, and we pass the benefits on to you. You’ll always speak to the same person, who will get to know you and your needs. And, because we’re not burdened by unnecessary paperwork or processes, we’re able to treat you as an intelligent human being. Not just a tick box on a form.
We call it the flipside and that’s why White Oak UK brings money into your business, not bureaucracy.