Don’t get caught out by the basic errors.
A successful application for a small business loan could give your venture the resources it needs to develop and grow. However, particularly for early stage companies, the applications process is full of potential hazards. If you want to ensure that your application has the very best chance of success then, according to the online broker there are some key mistakes to avoid.
Not being able to identify why you need the money
If you can’t provide a lender with clarity when it comes to what you’re planning to use the funds for then it’s highly likely that they won’t be that keen to approve the application. You need to be able to show that the money is going to be spent on things that will improve the current financial position of the business. If you’re vague or looking for cash for “general purposes” there’s no real reason for the lender to say yes.
Poor – or non-existent – financial records
Lenders require financial information about your business in order to make a lending decision and if you can’t provide this then your application won’t be successful. Your financial records should be concise, well organised and up to date, providing a clear and transparent insight into where your business is right now and how it got there. Your personal financial records should be equally well-organised, especially if you are planning to apply for a guarantor loan.
No business plan
Your business plan is essentially the road map that you’ve produced to take your enterprise from where it is now to increased success and profitability. If there is no business plan then this won’t provide a lender with confidence that you have a long-term strategy for success. The business plan is also a crucial document for communicating the heart of your venture. You can use it as a tool to demonstrate what the business is about, what kind of market opportunity exists and why your product or service is necessary. All of these will have a part to play in convincing a lender that you’re a viable lending prospect.
The wrong type of loan
Not every loan option is going to be the right choice for your business and choosing the wrong one could be the main reason for a declined application. Find a loan that is suitable for the business and for you as an individual entrepreneur. Make sure you think carefully about the amount of the loan that you apply for and whether the cash flow and assets you have are likely to convince a lender that the repayments will be affordable.
Not sorting out your own credit record
For small businesses – and start-ups – where there is little or no financial history to go on, lenders will often look at the creditworthiness of the entrepreneur to determine borrowing risk. If you’ve never really looked at your own credit report then it might be time to go through and correct mistakes or understand where a lender might take a negative view. It’s also going to be important to ensure that you don’t have too much personal debt, as this could mean a lender sees you and your business as a poor credit risk.