When you apply for finance with a lending institution they will want to know a lot of detailed information about your business. Being an SME, they will also want to know about your own personal credit history. The best way to tackle this situation is to be prepared - go into that meeting armed with all of the information they could possibly need and more!

A credit provider will examine a variety of factors when determining the level of risk they deem to be associated with your business - these include:

• Credit history: Most lenders will run a routine credit check as part of the normal finance approval process. If you are an established small or medium sized business they will look at both your business credit report and your personal file. If you are a start-up business (in which case a commercial credit file will not exist), the lender will only be able to asses your creditworthiness based on your personal credit report.
  
  
• Financial position: Your ability to make regular loan repayments (cash flow) will be closely examined. This will include reviewing any other current debts that may impede your ability to service a new loan / credit facility. A cash projection will be important to a lender as it is the actual cash left after expenses that will repay the loan, not income. Developing this projection before you meet with a potential credit provider will also help you to demonstrate that you are an effective manager.
  
  
• Business planning: Whether you are running an already established firm or looking to start a new business, it's very likely that you already understand the importance of developing a business plan. This is an important part of your business planning however it will also come in handy when you apply for finance. The information in your plan could be used by the lender to assess the viability of your project.
  
  
• Industry: The lender may consider the industry in which you operate (or which you plan to enter if you are a start-up). They'll examine competition levels, barriers to entry, profitability of the sector, business failures and economic conditions.
  
  
• Business seasonality: If your business has a strong seasonal nature (such as ice-cream or swimwear), a lender will be concerned about how you will deal with the cash flow pressures in the off season.
  
  
• Start-ups: In most cases a new business is considered to be a high risk for a credit provider as it incorporates financial, business and management risk (particularly for first time business owners). If the credit provider believes you lack some of the basic all-round management skills to operate a successful business, it will increase the perception of risk. In most instances the lender will request security for a loan.

Essentially, banks and other lenders will look at your businesses and personal risk profile when considering your loan application. Understanding what they will be looking for and what they consider risky will help you present your business in the best possible light.

The key is to be prepared. As a general rule the lender will look for security (what will you give them if you can't repay the loan), cash flow risk (including any other debts you might already have) and business risk. It's always better to have too much information rather than not having enough.

Check my D&B credit report

Find out how your business appears to existing and potential creditors by receiving a FREE copy of your D&B Report.  Simply complete the D&B profile form online or by downloading a copy here  to ensure your report is up to date.  Within five business days of receiving your profile D&B will return an updated copy of your D&B Report.