CAMPARI: preparing a business bank loan application

Bank loans are an important source of funding for any business, helping to fulfil orders, employ staff or finance patent protection applications. This guide uses a handy acronym to help you fully prepare for a loan application and maximise your chances of receiving capital.

The CAMPARI method stands for

• Character
• Ability
• Means
• Purpose
• Amount
• Repayment
• Insurance

The principles it outlines are used by banks and investors worldwide. It’s an easy way of making sure that you are fully prepared when you apply for any business finance – maximising your chance of securing the funds you need. We will take you through each part of this process and explain what each letter means.

Character

Banks take a gamble when providing loans. The more confidence they have in your ability to deliver, the more likely you are to receive the capital you require. Naturally, presentation is very important. Dress and act like a professional and don’t be late. Interact well with your bank manager and show you are a capable business leader. Be willing to show evidence of a good trading history and the ability to provide quality services to customers while making a profit.

Ability

You must be unequivocal when telling the bank what you need the capital for and how you’ll be able to afford the repayments. There is no room for ambiguity. Many applications fail because the entrepreneur does not directly and clearly show how a profit will be made on the initial capital; bank managers cannot clearly see how they will get the money back and therefore consider the application to be too risky. When presenting your case, it must be obvious how you’ll repay the loan; use illustrations or bring in an accountant if necessary.

Means

Your business plan must be logical, display knowledge of your industry and target markets and be professionally presented. Business plans are important variables in whether a firm succeeds or fails; bank managers will be very keen to see your business plan is viable and can produce a return. Make sure yours is watertight; ask a professional to help you if required. 

Additionally, ensure your business model is solid. If your business model is poorly monetised, irrational or hard to make sense of, this is going to dent your chances of getting a loan.

Purpose

You must clearly show why you need the money and how you’re going to use it. There needs to be a good business case for the capital rather than simply because your business will benefit from increased revenue. Some examples are:

• You have an order that needs fulfilling but there’s not enough liquidity in the business to do so
• You need a specific piece of machinery in order to expand your range of products and services

Whatever the reason for the loan, you need to show that it’s a good reason, and one that will generate a return.

Amount

Bank managers want to know why you need the amount you’re asking for. In specific detail, you need to show precisely what the money will be spent on. This is more than about telling the bank manager the purpose of the loan. You need to explain how you’ve arrived at the figure you’re requesting and how it’s going to be spent.

Repayment

Bank managers must be confident you’ll meet repayment terms, or your application will get rejected. Be prepared to show substantial documentation relating to profit margins, cashflow forecasts and other key financial information. Bring your accountant or consult them in advance of the appointment if you’re unsure. Don’t exaggerate forecasts or profit margins. If your loan is secured, you may lose your property or business assets if repayment terms are not adhered to.

Insurance

Ensure you’ve taken steps to protect yourself should things go worse than expected. You’ll need a backup plan to ensure you can still pay off the loan should you receive a less than satisfactory return. Take out adequate insurance where need be and take steps to diversify revenue streams to ensure you’ll still be making a profit should the loan capital fail to make a return.

Informed Funding

Workspace are proud to partner with informed Funding (iF) who frequently offer free conferences, seminars and one-to-one financial consultations for our customers. They work both on and offline to help businesses identify financing issues and raise the funds they need. 

Other ways of accessing finance

Crowdfunding - This process is where you take small amounts of capital from a large number of people, usually via the internet. It can also be conducted via social platforms to get the word out about the business, with the goal of attracting new investors.

Angel investors - wealthy individuals provide funding in exchange for a share of equity in the business. Some work in groups and decide where to invest as a team, most invest alone, but either can be beneficial for your business.

Venture capital - Venture capitalists are investors who put a larger amount of money into a business in exchange for equity and get returns when the business goes public or is acquired by another company. Venture capitalists only invest in companies that are likely to give good returns on their investment.

Ready to apply?

Please see how to apply for a business bank loan for details of the application process.

Exclusive to Workspace customers, Informed Funding events help businesses learn about all aspects of funding and provide invaluable networking opportunities. Find out more about how you can boost your company’s offers by attending Workspace events.

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