One of the first things overly-optimistic entrepreneurs discover as they look for funding is that banks don’t fund business plans. In their defence, it would be against banking law if they did. Banks are dealing with depositors’ money. Would you want your bank to invest your current account balance in a start-up? I would not and neither would the banking regulator, according to articles.bplans.com.
So, here is what to expect a bank to ask for when you apply for a commercial loan for your business. There will be occasional exceptions to every rule but here are the general rules:
Collateral
As explained above, banks do lend money to start-ups. One exception to the rule is that there are programmes that guarantee some portion of start-up costs for new businesses, therefore, banks can lend them money with the government, reducing the banks’ risk.
So, your business has to have hard…
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