As with almost all of our business transactions today, it well pays to be careful in what we share online. The instant access that people have online makes it even more convenient, easier and faster for anyone with a small business to gain access to tools and access to many forms of financing online. One
As with almost all of our business transactions today, it well pays to be careful in what we share online. The instant access that people have online makes it even more convenient, easier and faster for anyone with a small business to gain access to tools and access to many forms of financing online.
One of those financing systems that business owners can take advantage of today is business loan applications. This loan helps them get the money to pursue their business expansion or just the money needed to increase their chances of success in their endeavors.
Even with the instant access that people have online, they still get a lot of barriers to the access of these financing opportunities. These people may not be able to get the support for their small business mainly because their applications have errors in them. Many small business owners don’t get the opportunities they need because of denied business loan applications or loans with less than optimal interest rates. Why? This may sometimes be caused by an application without the required comprehensive research and claim that the bank needs. That’s why when applying for a business loan, you must ensure that you avoid the following mistakes.
1. Make sure you check your credit score.
Did you not know that even in a simple business loan application you must ensure that your credit score doesn’t have any factors that redden its standing? Your credit score is paramount in giving you the reputation as a business owner who wants to have a loan. Your credit score will also determine the kind of business loan that gets approval. Whether you want a significant funding for a project or a small but highly needed loan, a good credit score can help you land the best interest rates for your investment.
For example, if the average score of your credit report is at least 700, you can easily find yourself in great shape regarding being approved and given a considerably favorable business loan. However, if you get a score of 650 or below, that will cut your chances of approval, as well as high-interest rates that the bank will confer on you.
Before applying, make sure you settle your credit score first by improving the score. Otherwise, you might be wasting time for a business application that you may not get. How do you do this? You can settle your credit score by monitoring it with three reporting agencies int he market: Equifax, Experian, and the TransUnion. Checking with these agencies your credit score, what is contained in your credit report and checking whether you have misrepresentation in any of the statements will make sure that your application will get fair chances of approval.
When you find a mistake in your credit score, immediately settle the credit with the reporting agency. You can do this n the form of writing in the quickest time possible because it takes a long process just to correct a simple data error.
2. Don’t forget writing a business plan.
What does your business provide to the society? How is it going to generate income? What is the marketing strategy for your brand? Will you need a lot of infrastructures to achieve the goal? These are questions that your bank needs to know before approving any business loan. These are also questions that you can answer only by writing a good business plan. Without such a plan, it may well be hard for your business to know where and what your business projections will be.
You have to put all these questions not just in your head, too. You need to put them all in writing and makes sure that your lender knows every detail that your business wants. How will the lender know if your chances of approval are high or whether your business is well thought-out when you don’t put them in writing? It makes a whole lot difference if you place your ideas in a business plan that’s well-articulated and well-researched. It may mean the difference in getting your business loan approval on the first try.
3.Your financials are not readily prepared.
Nothing hinders your approval like a poor bank statement record. You won’t be able to get your loan if you’re not able to show the lender that you have a history of good financial standing. Show them your bank statements for the last six months and your tax returns for the previous two years that you did work for, and you’ll get better chances.
You also need to show them your cash flow analysis and a forecasting of where the revenue will come in a particular time frame. The good thing about this issue is that you can get software to analyze for you. Just get a business accounting program such as Quickbooks, run a calculation, and you will now have a good idea of your business financials way before submitting your loan application.
It’s important to make sure that lenders will have a way to guarantee the return of their money. Although in recent years, lenders have found a way to ease their approval of small business owners, banks still require small business owners some good collateral to make sure that the loans are guaranteed.
The collateral will serve as the lender’s insurance policy that if the business won’t fly, there is a valuable personal asset that the bank can claim to offset the damage. If you can’t find a collateral as a guarantee to get your loan approved, it can be much more difficult to see a good lender that will be willing to work with your business ventures.
There’s a lot of factors that lenders or banks can disapprove your small business loans. The factors we listed above are the most common ones that you should take note of if you want to get your funding and loans easily approved. Avoiding these mistakes will not guarantee you an investment, but they will indeed increase your chances of approval.