Small business owners can be some of the most dedicated and skilled people on the planet. They are driven and have big dreams. Nothing can stop them. For such driven, motivated people, there is a chance that certain operations are not done correctly. Small business owners are often driven to be quick and can overlook details that could cause the business not to run smoothly.
Small business owners have a hard time understanding how to apply for business loans. Here are some tips to help you avoid making mistakes when applying for business loan.
Number 1 – Lending institutions and banks have no interest whatsoever in taking on any risk. Lenders have been reluctant to lend money to businesses or individuals who don’t have the exact product they need. It is important to know what the bank’s underwriting guidelines are. Don’t be intimidated or pressured by the bank and its loan officers. It is simple to understand the bank’s processes and guidelines. Ask the bank how long it takes to get approved for the specific business loan that you are interested in. Are they looking for a particular credit score? Are they looking for a high business credit score? Are they a requirement that you have been in business for more than ten years? Once you know what these guidelines are, then you can work to meet them. You should not apply for a loan for your business without knowing the underwriting guidelines.
Number 2 – Your credit score will determine whether you are approved for financing. A lot of banks will require you to have good personal credit and good business credit. The two scores can be different. You should check your personal credit score and your business credit score before applying for financing. It is risky to apply for a loan for your business without knowing the scores. It is very disappointing to be denied for a loan because your credit score was 700, but it really was 620. Your future chances of getting a loan for your business with another bank or lender will be affected. After you have been denied by three banks you will most likely be denied by all banks. This is because your credit score was checked too many times in a short time. Do your business and yourself a favor by knowing your numbers well before everyone else.
Number 3 – In today’s economy, there are two things that small business owners don’t see. Number one, almost every small business owner is in dire need of money. This means that there are thousands upon thousands of small business loan requests sitting on loan officers’ desks. Second, loan officers get paid on commission. This means that they only get paid once a loan is closed. These two facts are important. It is crucial to have a well-constructed loan package. Your loan application will be thrown out if you give the loan officer any reason to need more information about your business. We know that loan officers only want to get paid when a loan has been closed. Loan officers will only spend their time on loans that are simple to close in this economy. When applying for a loan, your loan application must be complete with all the information that the bank requires. These documents include a professionally written business plan, financial documents that are professional looking, articles of incorporation and good credit scores for both personal and business. These documents should not be put in a box and taken to the bank. You should organize them professionally and neatly so that the bank perceives your business as a positive one. Don’t assume you will be approved for a loan or credit line from the bank if you don’t have all the information.
Consider the bank’s money your hard-earned money. Would you lend money to someone who doesn’t have the financial resources to run a profitable, low-risk business that generates positive cash flow? Most likely not. Think about what you’d like to see from the banks. Your chances of being approved for business finance are higher if you’re more prepared.