Borrowing is a necessary fact of business life.
To borrow from a bank is a form of debt finance. The golden rule is to match the type of finance (short term-or long-term) to the intended business need.
Short term finance includes overdrafts, invoice discounting1 and business credit cards.
Long-term finance includes asset finance, term loans and finance under the Credit Guarantee Scheme2 if your business has been impacted by the Covid-19 pandemic.
Before you choose to apply for a business loan
Before you apply for a business loan, be clear with the bank and yourself what is the purpose of the loan, how much is required and over what period of time do you want to repay it?
Calculate how much you could borrow here
When you apply for a business loan, be clear what is being financed and what contribution is being made by the business towards financing.
What financial information will the bank require?
- Up-to-date financial and management accounts (typically the last six months)
- Debtor profile/listings
- Cash flow projections
- Confirmation of tax status
- Personal statement of affairs, covering the financial position of the owner
- Other information relevant to the particular application
Crucially the bank will need to determine your firm’s repayment capacity (aka ability to meet the terms over the life of the loan).
You may be asked to outline possible stress scenarios, for example what if revenues grew by less than 15% per year than projected, could the firm still meet its repayment obligations?
What is security and why does it matter?
While the Credit Guarantee Scheme2 is for unsecured loans of between €10,000 and €250,000, generally business loans require some form of security. Forms of security can include .a personal guarantee or property which can be offered to the bank
The purpose of security on a loan is it offsets the level of risk a bank is prepared to take. In the worst-case scenario, where repayments aren’t being met and other repayment options have been explored, the bank can call in the security which could result in the loss of the asset for the business. In most cases, neither the bank nor the business would want this, so it is incumbent on the borrower that repayments are met.
Apply for finance under the Credit Guarantee Scheme
Finance is provided by Bank of Ireland Finance. Bank of Ireland Finance is a registered business name of Bank of Ireland. Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland and, as a result, it is not covered by the Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme.
Scheme eligibility criteria will apply. All applications will undergo credit assessment and further information may be required. A guarantee premium, payable to the government, will apply.
Level of security required and rate applicable, will be determined by the amount, purpose and term of facility, in conjunction with the nature and value of the security being offered. Lending criteria and terms and conditions apply. Over 18’s only. Maximum credit of €120,000 available for online applications. Bank of Ireland cannot take responsibility for information on third party websites.
