In an ideal world, every business person would have sufficient resources to turn their killer business proposal into a stellar success. Unfortunately, as you know, things don’t work that way.
In truth, a great idea is just part of the equation; most entrepreneurs need a business loan at some point. Sadly, getting loan approval can be daunting if you don’t get all your ducks in a row.
Five Tips For Increasing Your Chances Of Approval
When thinking of applying for a business loan, put yourself in the shoes of your potential lender. If you were them, would you be comfortable loaning money to the applicant given the circumstances and applicable factors they provided in the interview?
Flip the script, look at issues from their perspective, and you see your circumstances in a non-biased light.
Let’s explore ways to increase your odds of getting approval.
1. Start The Process At The Earliest Possible
You’ll not walk into a bank, fill an application and get approval for the loan right away. The assent process may take weeks or even months to unravel. Thus, we suggest you start the loan application process at the earliest possible.
Don’t delay until you are in desperate need of money.
2. Evaluate Your Credit Score
You may crave detachment between personal finances and your business, however, lenders factor in your credit history when working out your risk level; there is no way around this.
If this part of the process worries you, focus on ways to boost your credit score. Credit Sesame claims your credit score comprises of the following factors: credit inquiries (10%), credit age (15%), credit utilization (30%), account mix (10%) and payment history (35%).
Credit utilization and payment history make up a considerable chunk of your score. Using less of the approved credit lines and paying utilities on time bumps your score a few points within a few months.
Practically, you’ll have trouble securing business loans if you score 660 or lower. Creditors prefer a score of at least 720.
3. Demonstrate Business Judgment
Potential lenders need assurance that you expect possible hitches and have a strategy in place to counter these drawbacks. Also, lenders take an interest in proving that you have set up the management to weather obstacles that may arise.
If possible draw up a business plan to show your financiers. The plan should provide two scenarios: first, how you suppose your project will play out if you fail to get funding and how it will play out if you do.
4. Maintain A Reasonable Debt Load
Your debt load is the liability carried on your statement of financial position. You need to demonstrate how you plan to handle your existing obligations and the added debt reimbursement your proposed funding will cause.
Prove the benefits that will arise as a result of additional debt. For instance, demonstrate how increased liquidity will be utilized; also predict added earnings resulting from the cash injection. The utilization of income from the loan matters a lot to the financier.
5. Explore Financing Options
Don’t presume your local bank will table the best terms. Compare fees, rates, lease terms and options of only acclaimed financial services providers.