Although there are many business ideas today which you can start with very little money in the bank, it’s not unusual for companies to be in need of extra funding at some point down the line. Even if you don’t need the capital in order to get started, many business owners find that additional cash is needed to get their company off the ground regarding marketing, hiring employees, improving customer service, and even leasing or buying a physical business space, such as an office or storage facility.
To get the funding that you need to improve business success, it’s likely that you’ve thought about applying for a business loan. These loans are given to entrepreneurs for the purpose of investing in their company and must be paid back with interest at an agreed rate. However, while going through the motions of getting a business loan may be simple enough, actually getting accepted can be trickier than you realize. So, we’ve put together some top tips to help you improve your chance of getting the business funding that you need.
Tip #1. Check Your Personal Credit Score:
Although you are applying to borrow money for business, rather than personal use, your personal credit score will be taken into account by the lender. Entrepreneurs who have poor credit scores, for example, caused by a lot of total unpaid debt or missed payments, are less likely to get the funding that they’ve applied for when compared to business owners with a good or perfect credit score. Lenders use the information from your credit file to determine your level of risk; how well you’ve been able to manage your personal debt will be used to gauge how they can expect you to manage your business finances, including the loan that they provide.
So, before you head to the bank to make your application, it’s a good idea to check your credit score, which you can do online using a service such as Equifax. For more information on how to improve your credit score and your chances of getting business funding, visit CreditRepairCompanies.
Tip #2. Have a Strong Business Plan:
For many business owners today, it doesn’t seem necessary to write a business plan. With Lean Six Sigma and Agile methods of doing business steadily rising in popularity, there’s an increasing number of entrepreneurs who’re doing away with the traditional business plan for more adaptable and flexible methods of running their company and planning for the future. However, when it comes to getting a business loan, it’s good to know that many banks and traditional lenders still very much expect to see a solid business plan on the table as part of your application.
Since most business loans will be paid back over a number of years, the lender will want to see your financial predictions for your business and have a good understanding of how you plan to deal with any potential financial issues in the future. A strong business plan that details all this information and more will help to put lenders at ease and improve your chance of success.
Tip #3. Consider Alternative Routes:
Even if you have a perfect credit score and a seemingly great business plan, this does not always guarantee that you are going to be awarded the business funding that you apply for. Lenders are becoming increasingly choosier about who they decide to accept for a business loan. Therefore, you should always be prepared to consider alternative routes should your application at the bank not go to plan.
Thankfully, there are many different options available to business owners today, that don’t involve taking out a loan with higher interest rates. For example, crowdfunding has become hugely popular in recent times, not only with fundraising efforts for charity, but also for gaining business capital. Via crowdfunding, you can ask people all around the world to invest a little or a lot in your business in return for a percentage of your profits in the future. This can often work out much cheaper than paying the interest on business loan repayments!
Tip #4. Seek Professional Advice:
Applying for a business loan is in many ways different from applying for a personal loan for yourself. Along with the need to have all the relevant documentation to hand, including information about both yourself and your business, you may benefit from getting professional advice beforehand to give you a better idea of the best steps to take. An experienced financial advisor is certainly worth the investment; they will be able to show you which factors are likely to hinder your chances of getting accepted for your loan, and what you can do to improve these. Your advisor will take your personal circumstances into account to determine the best course of action to take in a way that is tailored to you.
Tip #5. Don’t Rely on One Lender:
One of the biggest mistakes that business owners make when they apply for a business loan is relying on just one lender to make the decision. If that lender turns them down, they are left without a backup plan; a situation that could cause some issues for the company. Therefore, the best thing to do is draw up a list of multiple potential lenders before you go ahead and decide which ones are the best options for you to apply to. One tip for choosing lenders is to go for local and community banks and financial institutions; this is especially useful if you are also a locally-based business since the lender will be better equipped to understand how your company works within the local business environment. Larger, national banks should always be approached with care; they often have higher rates of rejection and may not be as swayed by the work that you do in your local community, for example.
Getting a business loan isn’t always an easy task, but by making sure that your credit rating and business plan is up to scratch along with getting financial advice, you can improve your chances of acceptance.