Another business myth that often rears his head is to do with business start-up finance. People say it’s hard to get a bank loan to start a business. This myth is reinforced by recent research carried out by the IoD which suggests that 60% of directors have been rejected by banks when seeking finance yet clearly this is not always the case. Many people rejected by bank lenders have no form of guarantee or little equity. Shoddy business plans might well be to blame also.

With the current state of the economic climate, the new coalition Government are keen to encourage the banking sector to lend more freely to SMEs and business start-ups. Pressure is mounting to give financial support to the small businesses in the UK which are the life blood of the economy.

Bank loans for business start-up

Getting a bank loan for a new business start-up might not be a difficult as you imagine. With a well drawn up business plan and the proper company documents, as well as some form of equity, banks will be far more willing to lend to new businesses. More often than not, new limited companies find it far easier to gain finance than any other form of business as lenders are far more willing to invest in this legal structure. Consider carrying out a company formation to start your new business to make the most of this and other advantages of limited companies.

Finance alternatives

New businesses should bear in mind that bank loans are not the only avenue for business finance. There are plenty of alternatives, some easier and some harder ways to acquire finance, each with its own merits. Take a look at our previous article “Top 10 ways to fund your new business” for more information. Government grants, factoring and regional growth funds are just a few examples. If you are willing to let others get involved in your new business, you may also want to think about venture capitalists and business angels.