Finding a right lender for your business financial needs is always hard, and in current tough economic situation it’s almost impossible especially for startups. The loan application rejection rate is very high among traditional and getting approval for a business loan is a hard row to hoe. There are mistakes you can avoid when applying and increase your chances of getting a small business loan.
The most common slip-ups that small business owners make are as follows:
- When approving a loan application, lenders review credit standings of borrowers to determine the credibility. If you have a non paid debt in the past, you’ll most likely be rejected. The nonpayment of a debt usually causes bad credit which leads to loan application denial. If you find yourself stuck in debts, consider applying to alternative financing options which doesn’t take credit score seriously. Alternative lender offers “bad credit business loans” as a savior to help businesses that are perplexed in bad credit dilemma.
- A stack of debt will always discourage lenders to lend you but the scariest thing is the little cash flow for them. Cash flow is basis of your business on which its performance is judged. Even alternative lenders won’t be able to get past this basis. If you don’t have much to repay you you’re not going to get a loan. Before approaching a lender, make sure you review your cash flow so as to increase your chances of approval.
- A strategic business planning is the key to your first great impression. Before making a loan decision, lenders will ensure you have an quantitative business plan. Even many alternative lenders required strategic business planning from business owners to predict their future revenues. This will facilitate the lender to perceive whether your business is profitable enough to repay the loan or not.
- It’s great to establish big future plans but staying realistic about your potential business growth is essential. Never expect more revenue from your business. If you have a realistic financial projections, it shows a positive impact to a lender that your have calculated plans and you’ll employ a loan intelligently. Moreover, you should plan your business growth in stages to make more precise financial projections.
- Before approaching a lender, make sure you have all the needed documentation as required a lender will require for a loan application. The Small Business Administration provides a checklist of everything a borrower needs for an organized loan application.
- In current tight economic conditions, getting a bank loan is very hard. Fortunately, they’re not the only best option available. Make sure you consider all your loan options before you apply to a lender as bank loans are not for one and all. In case of bad credit, try alternative financing options.
- Make sure you understand you may get rejected at least once when you apply a loan. If you are able to hold such thoughts you’ll have a much better chance of keeping your drive throughout the loan application process. If you face a rejection, linger why it happens and make the needed changes to get approved the next time you apply.
- You should be able to explain to the lender how the loan money will be utilized. How you’ll repay it, and how it’s going to positively affect your business’s growth. Strive to have a straightforward pitch and know you are able and will repay the What will you do if you can’t repay it?
- Always seek experts advice in the concerned matter. Lenders don’t want you to be an expect, but they do expect you seek assistance from experts. Use help from your expert workforce (banker and accountant) to make positive financial decisions while you aim to amplify your business profits.
- Don’t us an lethargic manner when approaching a lender. Show fervor about your business and portrays why you’re the best candidate for a business loan. Explains them you are a better candidate than the next one they’re going to interview.
If you can follow these straightforward guidelines, you’ll be able to secure funding for your business with a great first impression. If you still feel you have few questions in mind about the small business loan process, ask us and we can guide you through it.