How To Improve You Chances Of Getting A Business Loan
Whether you are starting a business or have an existing company, you may need business funding to finance your operation. A loan may be your best business funding option, but getting approved for a business loan can sometimes be challenging. Here are a few things that you can do to improve your chances of getting approved for a business loan from a lender.
Get Your Credit Scores as High as Possible
A high credit score means that you've made your previous loan payments on time and maintained low balances on your credit lines, and lenders will be more likely to offer you a loan if you do everything that you can to get your business credit score as high as possible before you apply for the loan. You should review your business's credit history and settle any credit disputes before applying for the loan so that your credit report will show an excellent rating. Many lenders also take a business owner's personal credit into consideration before offering a loan, so you might also have to improve your personal credit score before you can qualify.
Explain Your Business Plan
The lender will likely want to know how you plan to use the money for your business and how you expect to repay the loan; you can explain your business plan verbally or by writing and submitting a cover letter. By explaining your business plan, you'll give the lender a clearer understanding of why you need the money and how you will be responsible with the loan. The lender may additionally want you to explain how your business is expected to have a realistic monthly cash flow for at least the next year.
Collateral is a guaranteed asset of yours that can be used to repay part of the loan if you run into financial hardship. By offering collateral as you apply for the loan, you'll give the lender more reassurance that you won't default on your loan payments. Some lenders require collateral from business owners before business funding can be approved. Some examples of collateral that you may be able to offer include:
- Liquid assets
- Personal assets
- Accounts receivables
- Future sales receivables
- Commercial and/or personal real estate
- Machinery, vehicles, or other equipment that you use to run your business
Provide Detailed Tax Information
You can give a lender even more assurance by submitting your personal and business tax information so that the lender can verify your income and exactly how much you pay in taxes. This information will give a lender a better idea of your financial status and how much money you'll have left over after paying your taxes to repay the loan. The tax information that you submit should be highly detailed and include as many copies of all your tax forms as possible to show the lender that you're being forthcoming with this information and aren't trying to hide anything.
A loan can help get your new business off the ground or help your existing company survive, so you should do whatever you can to increase your chances of getting the capital that you need. A loan service that provides secure business funding can turn your desire of getting a business loan into reality if you qualify.
Contact a company like TrustAFI for more information.