One of the most important components of any business success is finance. Without adequate finances, you risk seeing it collapse. However, the lack of finance shouldn’t limit the prospects of your business. Get a business loan and let your business grow. It’s important to get it right as far as taking a business loan is concerned. In particular, you should avoid making the following mistakes when making your business loan application.
Don’t Inflate Your Income. Never Minimize Your Expenses
Your lender will want to get clear insights as far as your business finances are concerned. Things like cash flow & outflow will clearly show your business’s finances. This shouldn’t scare you to the extent of misrepresenting figures. In particular, you shouldn’t inflate your income and minimize your expenses. Of course, theoretically, this may look like you are managing your finances better. However, in reality, this will work against your business’s chances of securing good loans for small businesses.
Lenders are equipped with in-depth knowledge and experience. Thus, they may decide to review your bank account transactions. If your figures don’t tally, they will raise a red flag. So, don’t make your bank suspect you. Represent the figures the way they are. Banks prefer working with individuals who portray the highest level of honesty. Of course, most banks may overlook missteps in your past records. However, deception is one thing banks don’t tolerate whatsoever. So, be sure to disclose everything to your bank. You will increase your chances of securing a business loan. Even worse, dishonesty can lead to civil or criminal lawsuits.
Don’t Apply For a Wrong Business Loan Product
With a lot of SMBs facilities out there, it can be challenging to choose the right option. However, with the right information, it’s easier to choose a loan that fits into your business’s explicit needs. Start with research. Speak to experts. Ask for advice. Speak to the bank officials. Explain to them the type of business you are interested in. Applying for the right loan is very important. Remember, each loan has been designed to serve different purposes. So, don’t take any loan for the sake of it. Go for a loan that will help you achieve your explicit business goals.
Don’t Misread Your Lender’s Qualification Requirements
You will be subjected to strict qualification requirements. From age, finances, to other key business details, your bank will subject you to stringent rules. Thus, don’t misunderstand these requirements. From credit score to business hours, getting these requirements right is key. In fact, it will improve your chances of getting your loan approved. Plus, it will play a key role when it comes to preventing unnecessary credit pulls.
Having Incomplete Documentation
Banks place more emphasis on how you fill the paperwork. So, be sure to fill in all the required information correctly. Don’t leave blank spaces. Have all the correct information ready. Include all the necessary supporting documents. Of course, the paperwork may be tedious. However, this doesn’t mean using shortcuts. Fill all the tax returns, submit your business, prepare your balance sheet, have all the income statements ready, and input incorrect personal details. This will reduce delays and even loan denials.
Don’t Apply With a Bad Credit Rating
Business loans are risky in nature. Your lender will want to minimize the risks as much as possible. Thus, they will check all your credit reports. They will also check the credit history of your company. People with poor credit reports risk being denied loans. The same applies to businesses with poor credit histories. However, this doesn’t mean that people with poor credit scores won’t secure business loans. All you have to do is to work on your credit rating. Pay all your debts on time. If you have an outstanding loan, pay it. Consolidate all your loans. Make your recent credit history positive.
Don’t Mismatch Business Information
When filing in the details, be meticulous. Attention to detail will work in your favor. Avoid making obvious mistakes. Go through every single document. Don’t misspell your business name. Don’t omit the figures in your business information section. Fill in information like business name, physical address, EIN, your business website, license number, and email addresses correctly. After filling in these details, check again to ascertain if they are correct. Banks want perfect matches. In fact, most of them will use matching software to counter check your details. Simple mistakes can delay or deny you a loan. To avoid such discrepancies, consider copy-pasting details.
Missing Details
Missing details can cost you a business loan. Thus, it’s important to fill inaccurate details. For instance, your lender will ask you how you intend to use the business loan. Here, you must be detailed. You should give a detailed account of how you intend to use your loan. The bank will approve your loan based on the needs you present before them. Besides a business plan, you need to show how you intend to ruin your business. For instance, having elaborate business growth plans and other important documentation is important. Also, you should have clear business goals—i.e. both long terms and short term plans. In a nutshell, your lender will have a look at a deeper background of that business of yours.
Not Having Collateral
Lenders prefer businesses with collateral. With collaterals, lenders can be sure that you will repay the loan. So, before applying for a business loan, have good collateral. You can present a car log book, a title deed, property documents, and any other type of collateral for a business loan. Real estate property can also act as collateral. If you don’t have any collateral, consider asking family and friends to allow you to use their collateral for your loan application.
The Bottom-Line
When applying for a business loan, mistakes can cost you dearly. So make sure that you wont be making the same mistakes we’ve mentioned above. From trying to inflate your income to not having collateral — these mistakes can damage your chances of securing a good business loan. Always keep calm and do calculated decisions when you’re applying for a business loan
