18 Proven Ways to Help Your Business Loan Application Succeed

1
18 PROVEN WAYS TO HELP YOUR BUSINESS LOAN
APPLICATION SUCCEED
www.onlinecheck.com
2
Every small business owner needs money at some
pointwhether for operational expenses or to
benefit from an investment opportunity. Even for
business growth and expansion, a little extra
cash can make a lot of difference. For most
small businesses, it means filling out a business
loan application. For most small business owners,
filling out loan application can be frustrating
and time-consuming. According to a
SmallBizTrends, around 39 of small business that
apply for business loans from alternative lenders
get rejected, though only 1 out of 5 applicants
able to qualify for funding from traditional
banks. To make the loan application process
easier and smooth, weve have listed 20 proven
ways for you to strengthen your business loan
application, so you have the best chance of
securing the needed funding for your small
business.
www.onlinecheck.com
3
1. Why You Need One
The better you explain the reason of loan and
about your business, the sturdier your business
loan application will be. Before making an
application, ponder on why you need a loan in the
first place and exactly how youll use the money.
Do you want to buy new inventory to fulfill a new
order? Do you want to hire new staff? Do you need
to invest in an expansion opportunity? Do you
want to expand your offerings? Do you need to
open a new location? Do you want to refinance
your business debt? Do you want to run a new
marketing campaign for a new project? Do you want
to establish a business credit history rather
than using your personal credit for your business?
Irrespective of the reasons, why you need a loan
for your business should contributes to your
bottom line. You should also explains why your
business is worthy of a loan and competitive,
too. If youve successfully used a loan earlier,
talk about how you managed it, and for what
purpose along with the repayment. All these
little things can make a difference in getting
approval from lenders.
www.onlinecheck.com
4
2. Examine your Credit Scores
You should have absolute knowledge about your
business and personal credit scores. You can
check your business credit score by requesting a
credit report from credit agencies like Experian,
Equifax, or Dun Bradstreet. To check your
personal credit score, you can visit Equifax and
CreditKarma website free.
According to State of Online Small Business
Lending report, a business owners personal
credit score carry more value in deciding the
loan APR. A frequent check of your credit scores
will help you assess your current financial
standings and help you prepare early for a
business loan application.
Credit score is the major factor lenders consider
while evaluating business loan applications. A
credit score of 550 is essential to qualify with
most lenders, and above 640 is favored. The
credit scores are used to evaluate borrowers
creditworthiness, as well as the terms of the
loan.
Mistakes can happen and credit agency can make
that too, If you find any errors in the report,
youll need to contact the bureau (or the
collection agency) in writing to dispute them in
time.
www.onlinecheck.com
5
3. Pay-Off Existing Debts
01
Credit scores are determined based on different
factors such as the number of accounts you have,
the types of accounts, used credit vs. your
available credit, the length of your credit
history and your payment history.
02
Your payment history is considered the most
influential factor regardless of youve paid
your bills on time or not. No matter how good
your credit score was, a single late payment can
drop your score by up to 100 points.
03
So, before you apply for a business loan, try as
much as you can to pay off your outstanding
debts. Awkwardly, theyll still appear on your
credit report, but this will conserve them from
damaging your credit score.
www.onlinecheck.com
6
4. Avoid Liens on Business
A tax lien can have devastating effect on your
application, because it signifies neither you
made timely payment of your business taxes, nor
you arrange a payment plan with the IRS. And this
means it will be almost impossible for you to
secure financing, unless you arrange a payment
plan with the Internal Revenue Service (IRS).
After the ta payment, the lien will be remove
from your credit report.
You might have a UCC lien earlier when you
secured a loan from a bank or an alternative
lender. Occasionally, businesses might have a UCC
lien without even knowing it. It is recommended
to have it clear from your report by requesting
to your states Secretary of State Office.
www.onlinecheck.com
7
5. Apply When the Business is Doing Well
Bank statements are among the prerequisites of a
business loan application, and if you apply
during a period when the business is slowthe
statements wont demonstrate how good your
business has really been doing.
If your business cash flow fluctuates during the
yearmaybe youre in small landscaping business
and get more business during the summer when the
services are in high demandensure you make an
application during or just after when your cash
flow is good.
www.onlinecheck.com
8
6. Describe Personal and Business History
You started with your business info and the
reason why you need a loan have it combined with
information about your personal knowledge and
learning for the lenders. This could include your
diploma, professional associations, licenses, and
any professional awards youve won over in your
career. You should also describe your business
history and its finances. The more details you
provide to lenders, the better your chances of
being evaluated quickly, since youre equipping
lender with all the essential information to
examine your application as well as
creditworthiness.
www.onlinecheck.com
9
7. Consider Legal Assistance
Completing a loan agreement can be confusing with
so many complexities involved such as APR,
payment and amortization schedule, payment
penalties, arbitration terms, grace periods, late
fee payments, and questions about your business
and personal qualifications. As a borrower, you
must provide all such information, and your
ability to provide appropriate and complete
information can matter in securing the loan or
not. If theres something you dont understand,
or are uncertain to answer, consider getting
assistance from a lawyer to help you with the
loan application fine prints. This will not only
saves you time and trouble, but also money in the
end.
www.onlinecheck.com
10
8. Make a Solid Business Plan
Executive business summary
01
Current and earlier businesss finances
02
03
Sales volumes
Product lines with prices
04
Not every lender requires it, but creating a
solid business plan can get you a gold star and
demonstrates a lender that you are organized,
ready, and responsible. This also demonstrates
why your business needs a loan and how it
benefits your business.
Revenues
05
Organization and management team
06
Any outstanding debt
07
Cash flow analysis
08
Moreover, it also allows you provide realistic
repayment plans, convincing lenders that you have
a strategy in place for loan repayment. The
following things should be included in your
business plan
09
Competitors analysis
Strategy and Implementation
10
Financial plan and projections
11
www.onlinecheck.com
11
9. Be Realistic
Be realistic in your goals as well as in your
loan application. Dont get optimistic about high
sales and revenue after securing the loan. The
key is to demonstrate stability and thats what
you should do by staying realistic. Keep in mind
that when you secure funding, youre getting into
an agreement with the lender where youre bound
to make timely loan payments over a period of
time. Dont make promises you cant keep, else
youll end up hurting your relationship in the
long run. The most effective way to influence
the lender with your numbers is to demonstrate a
healthy cash flow and that you consistently
review your budget to ensure that you are
managing expenses and reducing costs when
possible.
www.onlinecheck.com
12
10. Save a Nest Egg
You might be familiar with the phrase the more
the better. The same apply here as well. The more
money you have in your business bank account, the
better.
Try to save a nests egg for at least three months
for operating expensesincluding your potential
loan payments when you make a loan application.
This demonstrates the lender that youre able to
make the payment even if unexpected happens.
www.onlinecheck.com
13
11. Choose the Realistic Borrowing Amount
Be realistic how much you need instead of
applying for more than you need. In order to make
your application a success, its imperative to
know your cash needs. Dont guess or ask for too
much, crunch the numbers before deciding the loan
amount. Lenders might refuse business loan
applications that require small amounts of money,
because the processing cost is fixed and lenders
will make less money from a small loan than they
would from a bigger loan. Lenders will be more
willing to work with enthusiastic entrepreneurs
that are realistic, responsible and know how much
money they need to grow and succeed.
www.onlinecheck.com
14
12. Calculate Your Monthly Payments
Its advisable to calculate your DSCR and DTI
scores before making a loan application. A
positive ratio scores will help increase your
chances of getting approval. The ratio scores
will also help you discover your affordability
each monthenabling you be realistic about your
borrowing amount.
Every lender biggest concern is that can you
repay the loan? If youre unable to convince the
lender, youre behind the eight ball.
Lenders use debt-service coverage ratio (DSCR)
and the debt-to-income ratio (DTI) to assess
whether a borrower is able to afford monthly
payments or not. Both ratios demonstrates
business affordability and the risks.
www.onlinecheck.com
15
13. Debrief
Stay attentive and always ask questions to your
loan officer about the payment schedules, payment
methods, and loan fees. This demonstrates that
youre serious about the loan process, and also
conveys that youre thinking every pieces
cautiously. A sensible borrower is likely to run
into unanticipated problems like prepayment fees
or hidden charges.
www.onlinecheck.com
16
14. Collateral Appraisal
If youre preparing to use collateral to apply
for a business loan, its constructive to have it
independently appraised via a third party. This
helps in increasing your chances of approval,
securing low interest rate and more wiggle room.
Generally, the lender will order the appraisal,
but Federal regulations state that the appraiser
must be neutral and have no direct or indirect
interest in the business. The collateral value
must meet or surpass the amount remaining on loan
in order for a loan to be considered secure.
www.onlinecheck.com
17
15. Be Patient
Be patient after making a loan application.
Higher loans take time to approve. Therefore, if
you need quick funding in a day or two, there are
lenders that can get you fast business loans,
considering your finances meet a certain minimum
requirement. On the contrary, if youre looking
to secure the best loan deal, with lowest
interest rates and flexible terms, be patient in
terms of weeks or months.
www.onlinecheck.com
18
16. Leverage Social Media
A presence on social media influences nearly
every aspect of life and this includes your loan
application as well. A companys feasibility is
closely linked to social media activities, so it
shouldnt be a surprise that social media is an
important aspect of business loan application.
Many online lenders, including few banks, are
starting to review business social profiles while
making a loan decision, which influences both
consumer and business lending. While reviewing
social media profiles, lenders take into account
different considerations such as your
relationship with customers and clients,
products/services ratings, and how devoted youre
in your business. Its also beneficial to pay
attention to your social media, even outside the
context of a business loan application. If
lenders see what they want to see like quality
customer support, positive ratings, commitment to
help customers and response to poor reviews
they consider that your business has good
character.
www.onlinecheck.com
19
17. Select the Right Lender
Searching and finding the right lender plays an
important role in a business loan approval. There
are different lenders offering different kinds of
loan products and has different requirements.
Some lenders willing to lend to established
businesses, while some to startups. Some are
interested in good credit score, while some
consider business revenues. Therefore, before
devoting all your efforts into completing a loan
application, work on exploring lenders and their
lending requirements to understand will you
qualify for a loan or not and at what terms.
www.onlinecheck.com
20
18. Dont be Afraid to Ask for
Extra Help
GET HELP
After all these ways, if youre still concerned
about your loan application or require
consultation, dont be afraid to ask for
professional assistance. There are organizations
like SBDC and SCORE that offer business advice in
all aspects and stages of business, whether
youre just starting or growing your existing
business. You can also get assistance from your
accountant to have your loan application and
financial documentation in order and highlights
any potential red flags.
www.onlinecheck.com
21
FinalThoughts
Weve covered eighteen proven ways to help your
business loan application succeed. By optimizing
your business loan application and understanding
exact lenders requirements, you considerably
increase your chances of getting quick approval
on your loan application.
www.onlinecheck.com