Have you ever tried to get a small business loan? It’s kind of a tough battle, even more now than ever. How tough it can be?
We found some interesting facts:
1. 74% of all small business loan applications do not get approved. The approval rate is only 4%.
2. Banks are taking no risks in funding small businesses – only some doctors, lawyers and CPAs or companies gets qualified that have been around a long time with increasing gross income every year.
Probably, the reason behind the banks have put a tighter net on the money tree can be defined with two words – regulations and profit. The fact is there have been a number of traditional lenders came into existence recently. Banks are now facing competition and they only can add up a little percentage of interest which may be, they understand, of no use to them.
For majority of those small business owners who are having issues trying to deal with our beloved big banks, I contacted one of known Financial Expert, and asked him to offer some tips along with some of my own:
1. Clear The Financial Mess: Are your financials in a mess? Lenders are now being super conscious because new rules have put increased pressures on them to verify the ability of their consumers to pay back their loans. As a lender I need to verify all the information my borrower gives via documentation. The more he has done his homework the more are the chances of approval, so keep the records good.
2. Build and Manage Relationships: It’s important to establish yourself locally, as lenders would like to see your small business being successful and victorious” says expert. Creating and managing relationship can take some of your time. But the results are significant part of being a trusted small business owner, especially when you want to get qualified for a secured loan.”
3. Explore Your Options: As with all other important financial decision, it’s a good idea to explore all options before making some final choice. A Small Business Loan is one option that can work well in almost every situation.
4. Understand and Show: A loan application without your own understanding is a waste of time for both the borrower and lender. So you should always be ready to demonstrate how much you need and for what, need to show them positive results you are likely to produce should the loan be approved.
5. Brief the Story of Your Company: If you are not able to tell the story behind why you need the funds, you can’t expect someone to just hand you a check. Besides the achievements your company made in the past you should also be able to explain the future goals and aims.
6. Business overall worth check: beside the loan amount you have applied for, the lenders will also consider some other factors related to your business to get you approved. “This is regular for a lender to consider other business factors as well,” says Blake. “These may include your education, business and industry experience, as well as the references you provided, and your personal background.”
7. Read Your Rights: Present year, borrowers have many new rights courtesy of the Consumer Financial Protection Bureau. Make sure you read all of these rights and put them to use.