Are you a new entrepreneur who needs starting capital or are you currently running a small business and you need more funds for expansion? Worry no more! Get a business loan and get everything started.
Wow! That sounds so easy and simple, but of course, for those who have already tried it, you know that’s not always the real case. While there are lots of banks and other lending institutions that offer financial assistance, it is no secret that the entire process of applying for a business loan and getting approved for it can be too complicated to handle. Lenders have stricter eligibility requirements which can make things frustrating. A test of patience, I must say.
Remember that submitting complete documents for your loan application does not guarantee an approval. In an article written by Ty Kiisel (Forbes.com), he pointed out the following “5 C’s” that banks consider when evaluating potential borrowers: Character, Credit Score, Capacity, Capital, and Collateral. Truth be told, lenders are more cautious now and it lies in your hands to convince them that you are a responsible borrower. Let’s put it this way — any financial institution will only grant a loan to those whom they consider to be a “good business investment” on their end — “High Revenue, Low Risk”.
There are various tips and suggestions from different online sources on how you can improve your chances of getting approved for a business loan, but here are what I consider to be the 5 most important ones:
First, your goal is to create a positive impression on the lender, so make sure to provide clear and detailed information about your business plan. According to James Woodruff (who has been a management consultant to more than 1,000 small businesses), your business plan must include the following information:
- Summary of the business and its products and services
- Experience of the management team
- Competitive environment
- Target market
- Financial statements
Second, be aware of your credit score. Most lenders rely heavily on your credit score to determine your commitment in meeting your financial obligations and being financially responsible. Monitor it regularly and once you find any errors, have them corrected. If your current score is low, don’t cover it up. Banks conduct background checks for all their potential borrowers, so it is always better to provide only FACTS.
Third, do your own research first about the type of loan that fits your business needs and the different lending institutions that may help you out. It may take some time, but as they say, don’t come to any battle unprepared. Remember that having zero knowledge is like signing a blank contract, so for your best interest, make yourself aware. A good place to start is Bizit which offer extensive reviews on various types of lenders and loans that are available in the market.
Fourth, always have a back-up plan. There are many financial institutions that offer small business loans, so you should keep on trying even if your first choice grants you an approval or turns you down. You should have a list of at least 5 potential lenders and compare their terms and interest rates. That way, you can make a better and wiser decision.
Lastly, get advice from financial experts or advisors. While self-study or doing your own research is good, nothing beats the fact that making big business decisions is less risky when you seek for guidance from people who have extensive experience in this field.
To sum it up, applying for a small business loan may be easy but getting an approval for it is no easy feat. Some may say that “if it’s meant for you, you’ll get it”, but of course, that is not an excuse for you not to do your part. If you want things to happen, you gotta work hard for it. Preparation is the key.
