Applying for business financing can be stressful and intimidating process and it can be quite perplexing to have an application for business financing rejected with little explanation. There are a few simple steps that a business owner can take to stay away from some of the possible perplexity and to develop a more positive experience while applying for business financing.
Five of these steps are explained below to help getting your business financing easier and also your clients should consider them before going to lender for a business loan.
1. Business Plan
If you do not have an appropriate business strategy plan, you may find it quite complicated to acquire business financing. The majority of lending institutions and private lenders will need at least a basic strategic plan of your business to evaluate, so they can check out if you’ve funds in hand in the future to pay back the borrowed amount.
At the end, the major reason why majority of businesses fail is just because the lack of business strategy plan. In case you are rejected by many lenders, then it is advisable to get a professional to review and update your business strategy plan.
2. More Resources Than Liabilities
This is obvious; however your resource strength will affect directly on the sum of the borrowed funds that you can request. You’ll be to exhibit your resources both business and personal. Don’t forget your resources include property, automobiles, business equipment, furnishings, fixtures, cash, and debt. When you perform an audit of products you will find that you really have more resources than you’d first thought. You’ll need every resource you are able to claim to be able to get a business loan deal for you.
3. Existing Credit Lines
In case you have a clear financial record, it’s a good start. In United States you need to demonstrate your previous credit background and if at all possible still be servicing one credit line. In case you previously have a business loan and have a clean record of repayment, you can definitely get further loan for your business. Given that you demonstrate that you can service the borrowed funds in its entirety, there shouldn’t be a problem. The primary method to demonstrate that is to exhibit a strong level of resources.
4. Strong Income Record
Cash flow is essential in acquiring a business loan of any sort. In case you can exhibit financials that point out your overall cash flow will be able to service the business financing then you should not have any problem at all in getting authorized for a business loan.
5. Provide Security Against Borrowed Funds
When you are applying for secured business loans you have the ability to borrow more money as there is collateral security attachment with this type of business financing. On the other hand, there is no collateral security with unsecured business loans. Being a property owner meet the terms for secured business loans, but when you’ve other tangible resources such as automobiles and investment property you are able to leverage off those resources to gain access to more cash. The negative aspect for this is that you can lose your asset in case of failure.