8 Tips on How to Ensure You Get a Business Loan

Starting a business can take the drain on your finances. Other times, you might not be able to expand the business on your own. Whatever your reason, at some point, you might have to take a business loan. Many promising businesses miss out on the opportunity of getting a loan because of a mistake made in their applications. Others miss out on it because they do not know the right procedure for securing a loan. If you are a small business owner and are struggling to get a loan, these few pointers will come in handy for you.

1. Have a Good Credit Score

One of the things lenders will look at before giving you a loan is your credit score. If you have reports of not paying previous loans on time, it will affect your credit score. To ensure you are considered for a loan in the future, ensure you pay off any outstanding loans and do so in good time. Even though you might fall into problems that mean you cannot pay off your loans in time, you need to be keen about this. It will work against you, especially when you are ready to get a loan that will work for you and your business. In order for you to qualify for a small business loan, you need to have a credit score of at least 700 and above. Calculate your score before going out to apply for a loan.

2. Good Personal Credit

Apart from the business’s credit score, you need to have good personal credit. How you handle your personal finances also reflects on your business. Even if you have a great credit score in your business, your chances of getting a business loan will be affected if your personal credit score is bad. Not only will you get a loan with good persona credit, but you can also rest assured that you will get better loan terms. These mostly include the amount of down payment you need and the repayment terms.

3. The Cash Flow

Lenders often look at how cash flows in and out of your business to determine if you can pay back the loan. If your business registers inconsistent cash flow, then chances are you will not get the loan. One of the biggest mistakes businesses make is no record the flow of cash in and out of their business. Apart from applying for the loan, it will also help you as an owner to see how well you are faring. Recording the cash flow will ensure you have a way of showing the lenders that your business is worth investing in.

4. Have a Business Plan

Over time people have tried to defend why you do not need a business plan to run a business. While this might work in some situations, it will not work for you in your business. There are various reasons why you need to make a business plan before applying for a loan:

  • It is a summary of your business: the business plan you create is what lenders look at when they want to see the legitimacy of your business.
  • It helps prove you are worth investing in: think of a business plan as a pitch. Lenders want to be convinced that your business is worth their investment. Since many of them might not have the time to come to the location, you need to convince them that you are worth their money.
  • The plan shows your worth: since the business plan will have details of our money and worth, it will go a long way to increase the loan you might get. Lenders usually give money based on how they perceive your worth. To ensure you get a good loan, you need to show on your pan that you are worth the loan you are applying for.

5. Be Organized

One of the things that will throw off lenders is a disorganized business owner. Before you go applying for a loan, ensure you have all the necessary documents. Do not go to a lender without a business plan or financial records. It is also important for you to remember that you need proof of collateral. Double-check your documents and have them all before you go see a lender.

6. Seek Professional Help

One of the best things you can do for your business is seeking professional advice. A professional like an accountant would go through your finances and advise on what would work for you and your business. They can offer expert advice on the kind of loans that would work for you and your business. An expert can also be able to point out if a loan is okay for you or if it will have you operating at a loss.

7. Ask Around from Different Lenders

To ensure you are getting the best loan deal around before you settle on a lender. More often than not, you might realize that the first lender who offered you money might have had really harsh repayment terms. Asking around will ensure you get the best deal that will work for you and your business.

8. Be Passionate About Your Business

Some lenders might need you to talk about your business. More often than not, this is where you get a chance to convince the lenders to invest in your business. If you are no keen, you might end up losing the support that you might have gotten. To help you deal with this, ensure you know your business inside out, be passionate about it to the extent that the lenders will see why they need to come on board. Lenders will shy away if they feel like you do not believe in your business enough.

Running a business is not a walk in the park, and you will need all the support you can get. A business loan is one way of getting such support. Do your research on the lenders you want to finance you. Also, ensure that you have everything the lenders will need to increase your chances of getting a loan. If you do not get it the first time, you can ask the lenders for their reasons, so your next application will be a better one.