You are pumped with a great business, only to realize that the reality of availing of a small business loan isn’t too welcoming. The credit allocated to small and medium business enterprises shrunk by 7.1 % at the beginning of 2020. The reason for such a noticeable dip was the period of complete lockdown due to the COVID-19 pandemic.
Don’t get disappointed yet, because like everything else, there is a brighter side to this problem too, and it comes in the form of 6 tips that can help you boost your loan application. So stick with us till the end, and we will spill our secrets on how to increase your chances of getting a business loan. Let’s get started.
⦁ Be aware of your latest credit score – A decent credit score of the business and the owner’s personal credit score are critical aspects since they help lenders ensure that the business plan is worthy of the investment. Check all credit reports for errors that you can rectify, evaluate your credit history, and remediate any obstructive activity beforehand. Your latest credit score in terms of timely payments and minimal debts will pave the way for your loan approval.
⦁ Equip yourself with a firm business plan – Be thorough when you furnish and present a business plan for your lender to get a clear picture of your business process. Highlight the supply and demand position of the products and services, the competition, and the reasons why the company has a better chance of gaining sufficient market share. You can also include a description of the team, your business model, and the consequent costs that would incur once the business goes live.
⦁ Clear all your debts – Step into the shoes of your loan officer for a second and reminisce whether you would approve a loan for a business that has a lot of debt associated with it. Seems doubtful, right? Consequently, to improve your chances of getting the loan, you need to have a clean record of your financial standing personally and professionally.
⦁ Make your online presence count – Many small business owners are unaware that lenders perform a thorough background search about their business and its profile on each online portal. Hence, the next few aspects for you to cater to before applying for a small business loan are the details mentioned on social media sites like LinkedIn and Facebook and the company website. Latest updates about the company, reviews from customers, and improved ratings on search engines are some of the measures to boost your chances of getting the loan.
⦁ Get support from professionals – When in doubt, seeking help in the form of an accountant, the company’s financial manager, or the board of directors is wiser than experimenting with your loan application. A professional who understands the complexities of small business loans can help you get your paperwork in order and ward off any weaknesses in your application.
⦁ Choose an appropriate loan product and lending institution – Lastly, save yourself the trouble and hassle of preparing multiple loan applications by shortlisting the loan and lending institution that seems the most suitable for your business. You can either approach commercial banks, cooperative banks, online lenders, or even peer-to-peer lenders for a variety of different loans. Study the mindset of your lender and their expectations to put your best foot forward.
As is clear, the responsibility of proving your business’s worth to secure a small business loan befalls on you. Arm yourself with these 6 tips in addition to maintaining transparency throughout the loan application process to step closer to your dream.