Now that you’ve read how to finance your startup with business loans, here’s how to get approved for a business loan. Rookie entrepreneurs have a lot of trouble getting business loans. The process itself isn’t difficult at all, but the lack of expertise in banking and financing a company, in general, can raise some issues. While it’s true that there are many aspects one has to take into consideration before applying for a business loan, getting it is by no means the most difficult thing you’ll have to as a business owner. So, let’s discuss how to get approved for business loans so the process is smooth if you ever need business finance.
Factors to Consider: how to get approved for a business loan
Check Your Credit Score
If you’re about to apply for your very first loan and have never missed a telco or utility payment, you won’t need to worry about your credit score because it’s as good as it can be. However, if you’ve had previous loans or bills and you’ve either defaulted or missed on payments, your credit score could be bad. In this case, repair it before you apply for business loans. You’ll save yourself some time by doing this. Lenders will turn you away and even though you can find some that will still agree to give you money, the loans will have higher interest rates.
Plus, you’ll have to provide the rating report before you’re granted the loan. The lender will study it and assess whether or not you’re eligible for what you’re asking. If they decide you won’t get the loan, they can point you in another direction.
Your Business Plan
Lenders will shut the door in your face if you meet up without having a clean-cut business plan. This has to contain financial projections concerning your company and the purpose you’ll use the money for. On top of that, you’ll have to make a statement of your own income, as well as of all the assets you possess. Tax returns could also be handed over alongside the business plan.
You’ll have to present your business plan and explain why you think you should get that loan and how you’ll be using that money to further develop your company. These presentations can be done in PowerPoint.
Make a Decision: Secured or Unsecured
Secured business loans will get you lower interest rates and a better repayment plan. Pay attention, though: you’re up for a lien on the asset you’ve secured the loan on if you default. Unsecured business loans come with higher interest rates because these decrease the risk you’ll go berserk and default on the loan. It’s a form of security for the lender. But on the bright side, you don’t risk losing your house.
Both these types come with advantages and disadvantages. Take a look at what those are and don’t make any mistakes. Once you’ve taken a loan, you can’t just tell the lender you’ve changed your mind.
Make it Clear that you Invest in your Company
Investing in your company is pretty much risking it. That shows the lender you’re not playing around and you’ll do whatever it takes to make your company successful. You’ll be seen as a risk-taker, and that’s something the lender can identify with.
This will make you a little more likeable. Risk-takers are held in quite a high regard by bank representatives, especially when their credit scores are great and their companies well above the floating level.
Answer Any Concerns
Lenders can be very sceptical and suspicious, but they have every right to do so. For instance, the lender can tell you – upon listening to your presentation of the business plan – that they have found a few flaws in it. If they think those are flows, this doesn’t necessarily mean they really are flaws. It’s very important you explain everything in detail. You have to be prepared for every single concern your lender might have.
This way, you show him you are both informed and determined enough to get that funding. You don’t have to lose heart over some affirmation a lender has made. Lending managers know what they are talking about, you can be convinced of that.
You might think that due to the fact that you’re a fresh business person, your chances of getting business loans are very small. It’s actually quite from the contrary: they’re high. Why is that? For starters, your credit score is virtually untouched, so you won’t have any issues with that. Second of all, if you have a perfect business plan, there’s really no reason why a lender could reject your application.
We have discussed how to get approved for a business loan, consider ALC Commercial as your trusted private lender. As you can see, the process of getting a business loan isn’t that difficult as the media or some of your peers make it look like. Just keep an eye on the disadvantages and be aware of how to get the best deal for your business.