Insight into How to Prepare for a Small Business Loan
It can seem a little hard to get approved for a small business loan. There is a lot of paperwork you have to complete and you will also need to provide documentation to support your loan application. Many business owners put this off to the last minute. Once you have submitted your application, you have to deal with the fact that big banks approve just 26% of the application. What can you do to improve your chances of getting approved for a loan?
This article is going to look at 5 tips that will help in improving your chances of getting approved for a small business loan. Whether you want the cash to purchase new equipment, fund expansion, or replenish your task, the following tips are going to help.
1.Whipping Your Credit History into Shape
You need to keep in mind that personal credit history plays a big role in the approval of your loan. Many people think that personal and business finances are separate, but the lender is going to have a look at your credit history to determine whether you are a risky borrower. Your personal credit history can let the bank know whether you are a red flag or a reliable investment that pays its debts on time.
Your credit score is going to be influenced by your payment history, the number of accounts, credit utilization rate, current mix, and history of credit use. If you are not happy with your credit score, then start to work on improving it. One of the biggest influential factors is paying on time. You can set up automated payments to help you pay on time and never miss on any payment. A good way of improving your utilization rate is by paying down any existing borrowing. Doing this is going to improve your credit score and improve your chances of getting approved for the loan.
- Preparing Documentation Ahead of Time
Lenders will often ask for additional documentation when you apply for a loan. It can be financial for the past years, proof of ownership related to collateral, and business certificated. This is the most tedious part of the application process for many business owners, but it is one of those things you have to do.
It is a good idea to speak to your lender beforehand so you can know the documents they are going to need when applying for the loan. You will be prepared and you won’t have to deal with any surprises. You will also save time because you don’t have to face delays when sourcing the documents. If you don’t have the documents, then start making time to contact the relevant parties. When you start early, you will avoid a lot of stress and headache because things will progress smoothly.
- Creating a Detailed Loan Plan
According to the experts at 1apcapital.sg lenders will feel more comfortable lending you if you can show them how you plan on using the cash suggested. A good way of doing this is by creating a detailed loan plan detailing how the cash is going to be used. Breakdown the costs you are going to incur and the predicted return. It should also have the timeframes for repayment. The lender will see that your plans are feasible and they will see you are a low-risk.
- Getting Support from Professionals
If you have doubts about your ability to create a loan plan or have any concerns, it is a good idea to get help from experts. You can hire an accountant who will help you with the application, then pay them on a per hour basis. Depending on the business structure, you might have to involve the board of directors or the financial manager. It is important to have knowledgeable people review your work so they can point out any weaknesses or gaps.
- Do Not Procrastinate
If you are borrowing from a traditional institution, be ready for it to take weeks or even months. This is why you need to start as early as possible. Do not procrastinate because you might end up not receiving the funds on time. When this is the case, you will be in a position where you have no other option than to take a loan that comes with terms that are not competitive. The process will be way faster when working with alternative lenders, and the approval can take just 24 hours.