A business loan can make the difference between the survival/success of a business and its insolvency. Fundamentally, any company can be the beneficiary of a loan and there are numerous businesses that wouldn’t have been here if it weren’t for business loans. But what makes your business eligible for a loan?
Lenders and banks are the first places where people go looking for business loans, but the vast majority of them have no clue what they need in order to be approved or even considered.
What Makes Your Business Eligible For A Loan?
- The age of your company: Your business must have a minimum of 2-3 years of activity. You will need proof of that since you must provide evidence that your financial position allows you to repay the loan you are striving to get.
- Good credit score: Most banks and lenders take your credit score into your considerations when you apply for business loans. It lets them know whether or not you are a bad player – that is if you’ve paid your previous loans on time (if that’s the case) and you don’t have a history of going default out of the blue.
- Excellent plan: No bank will ever lend business loans if the owner doesn’t have a clear-cut plan regarding the future of the firm. You mustn’t build a superficial one, but a highly detailed plan. You must prove that your managerial capabilities are top-notch, that you are innovative and you know what you’re doing. In other words, your plan lets them know why you need the money before you even open your mouth to speak your mind.
- A good number of business contracts: Business contracts basically represent the money that enters your company on a monthly basis. If your number of customers is high enough, then you’ll have better chances of acquiring a business loan. By contrast, the lower that number is, the lower are your chances of being eligible for the loan.
- Enough time on your hands: Typically, business loans are processed for 1 or 2 months, so you have to be flexible time-wise. This usually applies when you try to get a loan from a bank. Private lenders and online lenders are considerably faster, and they will only require you to fill out some forms and give them some bank records.
- Profit & Loss record: Every mistake you’ve made in your business and led to loss is recorded. So are your successes, of course. Just like in the case of the thorough plan, this register demonstrates that you know how to lead a company and how to keep a business alive while generating more profit than losses.
Even though it is extremely easy to find a bank or any other lender that provides loans, the process is quite painstaking and all-encompassing. And it has every reason to be so since business loans (and all kinds of loans) represent a serious matter that can have severe repercussions if not treated with enough responsibility.