(Newswire.net — May 2, 2018) –If you are thinking of getting financing, it is important that you maximize your chances with the lenders to get credit approval. Here are nine important things that can increase chances of having your loan request approved.
Demonstrate steady cash flow
It is important for you to demonstrate to the lender that your business has a steady cash flow. This is important because no lender will want to give money to a business that does not produce daily cash flow. If you have an adequate or steady flow of money, then the bankers will be convinced that you are in a position to pay your loan without defaulting. You should be ready to provide your bank statements, tax returns, and financial statements. These documents will act as proof of your financial history and ability.
Have a positive payment history
The debt payment history of a small business is an important factor for any lender. A lender wants to see that your business has a record of paying up your debt and on the agreed upon time. Most banks and other bankers will get a credit report on your business, and you must request to see it and confirm whether it is correct. You can also provide references of people who can vouch for you regarding your prompt debt payment, for example, the person you deal with at your current bank.
Know your risks
Lending cash to small businesses is usually riskier than the large corporations. This is one of the major reasons why small businesses have a tough time getting loans. Your risks of securing a loan increase if you have little or no collateral, low profits, unorganized records, a new business, and a poor credit history. When you know the risks that your small business presents to lenders, you will be in a better position to negotiate with the lenders. You will also reduce the risks of lenders pointing out the weak parts of your company because you already know them. In addition, understanding your risks can help you to make crucial improvements and build up a strong case for your business.
Have a controllable debt load
Your business should have manageable debt that you are currently servicing. You must demonstrate to the lenders that you can pay off your existing debt and the additional loan that they will give you. Most bankers will require you to show them how the debt that you are seeking will be beneficial to your business. You must show how this additional liquidity will be used and estimate the additional revenue that your business will derive from this new influx of money.
Type of loan needed
It is important for you to understand the type of subprime business loans that will work best for your business. Most people believe that small business lending is usually very slow and that it is difficult to get approval. However, this will depend on the financing that you are looking for. For example, small business administration loans will usually have higher requirements for eligibility and will usually take about 30 to 90 days to complete. On the other hand, merchant cash advance and business lines of credit have less stringent requirements and require fewer documents.
Keep documents in order
When seeking financing, transparency about the financial state of the business is important. You can make the application process less challenging if you have all your business documents in place. It is important that you have a system that ensures everything is in order. You should hire an accountant to help you in this. Most small business owners tend to do their own bookkeeping in order to save cash. However, you may end up ignoring the most important accounting aspects especially when you get extremely busy. With an accountant, you will be confident that all your documents are in perfect condition and are up-to-date.
Maintain an excellent credit score
To maintain a good credit score, you must ensure that all your bills are paid on time. This is because you must meet specific criteria for you to be eligible for the loan. Therefore, you must have the best credit score possible. You must ensure that you avoid things that will negatively affect your score, for example, foreclosures, late payments, charge-offs, and bankruptcies. Even though different lenders will have varying requirements, it is essential that you have the best score possible to increase your chances of success.
Demonstrate excellent business judgment
Potential lenders want to be sure that you can anticipate future challenges and have plans in place to handle any challenges that you may face. Therefore, when seeking financing, you must ensure that you know the challenges that your business may face and what you would do to handle any eventualities. Make sure that your business plan has at least two scenarios that demonstrate how your business will perform if you do not get financing and how it will perform when you get a loan.
Build relationships
It can be challenging for small businesses to get business loans, especially startup business loans. This is because you cannot demonstrate or give proof of how the business will be profitable and this makes you a larger risk to lenders. However, you can increase your chances of getting a loan by building solid relationships with the lenders early. You can take advantage of the products that banks offer to your company, for example, credit cards and business bank accounts. When you work with a lender more, they will know you better and you will establish trust with them.
Obtaining financing for your small business can be quite a challenge. However, it should never be a nightmare. Going to through the application process when you are well prepared can help you get the financing that you need and take your small business to a whole new level. You need to have all your documents in place and show the lender that you are a reliable and trustworthy borrower who can pay his/her loan on time. With the aforementioned guidelines, you can improve your chances of getting financing painlessly and quickly.