6 Simple Tips That Can Improve Your Chances of Getting A Business Loan: If you are an entrepreneur and want to start a new business, sometimes it can be a challenge to get a business loan for new start-ups. To get the funding that you need to improve your business success, it is likely that you have thought about applying for a business loan. The business loans are given to entrepreneurs for the purpose of investing in their business and must be paid back with interest at an agreed rate. However, going through the motions of getting a business loan may be simple, but getting accepted for the business loan can be trickier than you realize.
So, we have put together some simple tips that help you to improve your chance of getting the business loan that you need.
1) Have A Strong Business Plan:
Your business plan is one the most crucial factors that deciding the success or failure of your business loan approval. Lenders will want to see that you have a clear vision for the business, as well as a realistic view of what can be achieved within your marketplace.
Since most business loans will be paid for many years, therefore the lender or financial institution wants to see your financial predictions for your business and wants to ensure that you have a good understanding of planning to deal with any probable financial circumstances in the future. A strong business plan that gives details of all this information will help to keep more lenders easier and improve the chances of success in getting a business loan.
2) Have A Detailed Plan For Using The Money:
When you talk to the lender, you should be very clear about how the loan money will be used in your business. Giving some unclear or general response to growing your business is not going to work well. The lender who gives you the loan for your business, want to know exactly how the money will be used in order to determine the feasibility of your application.
3) Improve Your Credit Score:
Lenders assess your financial management skills by looking at your credit score. Note that while seeking business funding, the lender may also evaluate your personal credit score. A good credit score acts as an equipment to build up the lender confidence and reputation of a potential borrower in the loan market.
According to the Credit Sesame, your credit score is made up of the following five factors: Payment History (35%), Credit Utilization (30%), Credit Age (15%), Account Mix (10%) and Credit Inquiries (10%). As you can see, payment history and credit utilization make up the bulk of your score. By paying bills on time and using less of your approved credit line, you can raise your score up a few points in a matter of months.
4) Having Proper Documents:
Having the relevant documents ready speeds up the business loan approval and gives an impression in front of the lender that you are well-prepared for your upcoming investment.
Here is a general checklist of the documents that you need to submit to your lender along with the loan application form for the business loan approval:
- Identify proof
- Address proof
- Bank statement
- Latest ITR (Income Tax Return) along with the computation of balance sheet, income, and profit and loss A/C for the last 2 years
- Proof of continuation
Some lenders or financial institutions can also ask for documents such as Sole Proprietorship Declaration and Certified True Copy of Memorandum and Articles of Association.
5) Be Organized And Over-Prepared:
Organization and over-preparation play a key role in whether you will be approved for a business loan or not. One main point to remember is that if the lender asks you for a specific piece of information or document, you need to be capable of providing it in a timely manner. A lack of organization shows that you’re unprepared and risky. The best thing you can do is over-prepare before the time. By having ready every possible piece of information or documentation that your lender could want, you can assure him or her with your efficiency, and take control of the process.
6) Approach Multiple Lenders:
However it is good to build on existing relationships, there is no hard and fast rule that says you have to use your personal bank for your business finances or your business bank for all your lending requirements. In fact, spreading your risk across a number of banks can be a good thing to do, particularly if your business hits a financial downturn. If you have discussions with five lenders and four say no, you have still secured the financing you need. Don’t be afraid to meet with multiple lenders and see what they have to offer you could end up with better terms and a much lower interest rate by doing this.