How to Get Approved for Business Loans
Rookie business people have a lot of trouble getting business loans. The process itself isn’t difficult at all, but the lack of expertise in banking and financing a company, in general, can raise some issues. While it’s true that there are many aspects one has to take into consideration before applying for a business loan, getting it is by no means the most difficult thing you’ll have to as a business owner. In the following, we’ll pen out a guide you can use to get your business loans sooner than later.
Factors to Consider Before Applying for Business Loans
Your Credit Score
If you’re about to apply for your very first loan and have never missed a Telco or utility payment, you won’t need to worry about your credit score because it’s as good as it can be. However, if you’ve had previous loans or bills and you’ve misbehaved, i.e. either defaulted or missed on payments, your credit score could be low.
In this case, repair it before you apply for business loans. You’ll save yourself some time by doing this. Lenders will turn you away and even though you can find some that will still agree to give you money, the loans will have higher interest rates. Plus, you’ll have to provide the rating report before you’re granted the loan. The lender will study it and assess whether or not you’re eligible for what you’re asking. If he decides you won’t get the loan, he can point you in another direction.
Your Business Plan
Lenders will shut the door in your face if you meet up without having a clean-cut business plan. This has to contain financial projections concerning your company and the purpose you’ll use the money for. On top of that, you’ll have to make a statement of your own income, as well as of all the assets you possess. Tax returns could also be handed over alongside the business plan.
You’ll have to present your business plan and explain why you think you should get that loan and how you’ll be using that money to further develop your company. Nowadays, these presentations can be done in PowerPoint.
Make a Decision: Secured or Unsecured
Secured business loans will get you lower interest rates and a better repayment plan. Pay attention, though: you’re up for a lien on the asset you’ve secured the loan on if you default. Unsecured business loans come with higher interest rates because these decrease the risk you’ll go berserk and default on the loan. It’s a form of security for the lender. But on the bright side, you don’t risk losing your house.
Both these types come with advantages and disadvantages. Take a look at what those are and don’t make any mistakes. Once you’ve taken a loan, you can’t just tell the lender you’ve changed your mind.
Make it Clear that you Invest in your Company
Investing in your company is pretty much risking it. That shows the lender you’re not playing around and you’ll do whatever it takes to make your company successful. You’ll be seen as a risk-taker, and that’s something the lender can identify with. This will make you a little more likeable. Risk-takers are held in quite a high regard by bank representatives, especially when their credit scores are great and their companies well above the floating level.
Answer Concerns (if any)
Lenders can be very sceptical and suspicious, but they have every right to do so. For instance, the lender can tell you – upon listening to your presentation of the business plan – that he’s found a few flaws in it. If he thinks those are flows, this doesn’t necessarily mean they really are flaws. It’s very important you explain everything in detail. You have to be prepared for every single concern your lender might have.
This way, you show him you are: 1) informed and 2) determined enough to get that funding. You don’t have to lose heart over some affirmation a lender has made. He knows what he is talking about, you can be convinced of that.
You might think that due to the fact that you’re a fresh businessman, your chances of getting business loans are very small. It’s actually quite from the contrary: they’re high. Why is that? For starters, your credit score is virtually untouched, so you won’t have any issues with that. Second of all, if you have a perfect business plan, there’s really no reason why the lender could reject your application. Consider Business Loans a good source of business loans and directions in case you’re confused. Here, you don’t even to look all over the place for lenders!
As you can see, the process of getting a business loan isn’t that difficult as the media or some of your peers make it look like. Just keep an eye on the disadvantages.