Getting a business loan in Bangladesh, honestly

A bank is not deciding whether your idea is good. It is deciding whether you will pay the money back. Everything below follows from that.

What a bank actually checks

Your bank statement. This is the big one. They want to see money coming in every month, for at least six months and usually twelve. Money that moves through your personal bKash leaves no trace they can use. Money through a business bank account is proof.

How long you have been trading. Most banks want two years. Some SME schemes accept one.

Your papers. Trade licence, TIN, and your tax returns. A business that has never filed a return is a hard no at most banks.

Security. For a larger loan they want land, a building, or a fixed deposit. Small SME loans can be unsecured but the interest is higher.

Your record. They check the Credit Information Bureau. An old loan you stopped paying, even a small one, shows up here and it sinks the application.

Whether the business looks real. They will look you up. A business with a working website, a proper address, and photographs of the actual work looks different from a business with only a Facebook page. It is not the deciding factor. It is one more reason to say yes rather than no.

The papers to have ready

• Trade licence, current
• TIN certificate and your last two tax returns
• Bank statements for the last twelve months
• National ID
• Photographs of the business, the shop, or the stock
• A simple plan saying how much you want, what for, and how you will repay it
• Rent agreement or the deed for your address
• For a company: RJSC papers and audited accounts

How to prepare, starting now

If you are borrowing in six months, do these today.

1. Move everything through the business account. Sales in, payments out. A clean twelve month statement is worth more than any letter you can write.
2. File your tax return. Even a small one. A gap in your filing is the reason many applications stop.
3. Clear old dues. Anything sitting unpaid with a bank or a finance company will be found.
4. Write your numbers down. Monthly sales, monthly costs, what is left. On one page. Most applicants cannot answer this and it does not look good.
5. Ask your own bank first. The bank that already holds your account can see your statement. That is a real advantage.

How long it takes

Estimate: three weeks to three months from a complete file to money in the account. A small SME loan at your own bank is at the fast end. A larger loan with property as security takes longer because the property has to be valued and checked.

Anybody who tells you three days is not describing a bank.

Interest and what it really costs

Ask for the rate, and then ask for the total. Processing fees, service charges, and insurance all add to what you pay back. Get it written down before you sign anything.

Estimate: SME loan rates move with the market, so ask three banks in the same week and compare. Do not take the first offer.

Watch out for brokers

Some people will offer to get your loan approved for a fee. Be careful.

• Nobody can guarantee approval. A bank decides. Anyone promising a yes is either lying or planning to fake something on your file.
• Never pay a large fee up front. This is the most common way people lose money here.
• Never let anyone put a number in your file that is not true. If a broker inflates your turnover, it is your name on the form and your problem when it is found.
• Do not hand over blank signed papers. Not to anybody, for any reason.

A good accountant who helps you prepare a proper file is worth paying. Someone who says they know a man at the bank is not the same thing.

If you get turned down

Ask why, in writing if you can. It is usually one thing: not enough time trading, a thin bank statement, or something at the credit bureau. Most of those can be fixed in a year of doing the basics properly.

What to do this week

• [ ] Open a business current account if everything still runs through your personal one
• [ ] Put every sale through it from now on
• [ ] File any tax return you have missed
• [ ] Write your monthly sales and costs on one page
• [ ] Ask your own bank what they need

Nothing here is financial advice. Rules and rates change, and every bank asks for slightly different things. Talk to your bank and to an accountant before you borrow.