So, you have a dream of building a business empire? You have planned it all well, you know your matter, and you know how to get there! But, as we all know, growth requires capital, and that often means securing a loan to either get started or to see it grow and prosper. It is hence very important that you improve your chances of getting a business loan much in advance.
Just trying to decide whether or not a loan is required is in itself very frustrating and tiring. The process of acquiring a loan can be very stressful giving you sleepless nights. You might wonder at times why the bankers are giving you a tough time. But you must know that bankers have to protect themselves and earn money at the same time to keep their business moving. Your loan request will be rejected if they think you will prove risky.
Listed below are four tips that will help improve your chances of getting a business loan.
Plan early and have a contingency plan
Doing business is expensive, and hence it is a good idea to apply for a loan much before you need it. SBA loans for instance usually take 45 to 60 days for approval. It is better to apply for a loan when your business is flourishing since it is hard to get funding when your business is going through a low phase.
Do your homework very well before you approach a financial institution for a loan. Calculate well in advance and know how much money you require, for what it will be used, and also how it will be repaid.
Further, a contingency plan is helpful while applying for a loan. The bankers will then be confident that you will be able to pay them back if in case your business fails. A contingency plan also allows you to not panic and make impulsive decisions in times of disaster.
Your credit score must be high enough / Don’t apply now if your credit scores are low
While all banks, creditors and lenders follow their own set of criteria in approving or disapproving loans, the one thing in common is that each of them will check your personal and business credit records. So, if you have a low score, your loan plea will be rejected. If you know that your score is low, do not apply for a business loan, at least not until you have improved your credit score.
Listed below are ways to improve your credit score:
• Your credit reports must be accurate. Check your report carefully as it frequently contains mistakes.
• If you are always late on payments, fix it. It will do you no good to close accounts with credit balances. It will work only if you pay back all your credits and loans. You need to pay off all the interests that come with them as well.
• If you don’t have a credit card as yet, get one. Not having a credit card gives creditors the impression that you are not confident of being able to handle your credit obligations.
Remember that credit bureaus are given a maximum of 30 days to resolve an issue. So, apply for a loan only after the bureaus have resolved the dispute to improve your chances of getting a business loan.
Understand the ‘risks’ that lending institutions assess
Lenders, lending institutions, public and private sectors assess loan applicants on the basis of the risk involved. If the business is found to be a ‘risky borrower’, your loan is less likely to be approved.
Listed below are the traits that make a business seem risky:
• Bad credit history
• Payment default of previous loans
• The fragile system of accounting
• Below average earnings
• Questionable management
• Short duration in the industry
Seek out small business administration assistance or think local
SBA lenders are great to offer loans to small businesses. In fact, they have counselors to help you with the entire loan process. Your chances of acquiring loans are much more if you know well about the products available for your situation. Visit www.sba.gov for more information on SBA loans.
Community or local lenders are more in a position to understand your company and how it functions within the local business environment. They mostly understand your business’s potential to achieve success. When working with local lenders, show your involvement and interest outside of work within the community. They will then understand the commitment you feel both towards the community where you live and work.
Even though there are many more tips that we can give you, these four tips listed above will certainly increase your chance of acquiring the funding you need and improve your chances of getting a business loan.