You may want a business loan to start a small business, or to expand your current company. Obviously, even if you have a fail-proof product idea, it needs initial capital to get started. Business asset based loans are not easy to secure for many. Therefore, here are several tips that will surely help your loan application:
Improve Your Personal Credit History
Sometimes the most effective tips are the simplest ones. Business loans are not drastically different from other types of loans such as student loans or mortgages. Lenders approach business loan applications with the same scrutiny as the other ones, and in some cases even more so. For starters, lenders care a lot about the credit history of the borrower applying for the business loan. If this borrower has bad credit, then lenders are far less likely to approve the loan. Bad credit borrowers are considered risky, and lenders might think that funds given to a borrower with bad credit for business purposes might be misused for personal reasons.
Therefore, if you are a company owner with bad credit, it’s in your best interest to improve your personal credit score before applying. The best way to do this is to slowly start reducing overall debt. You don’t necessarily have to completely eliminate personal debt. Making payment for several months is enough to improve your credit standing in the eyes of a lender. A credit repair service can also help you repair your credit.
Polish Your Business Plan
Lenders will also pay particular attention to your business plan, and namely towards your product idea and your plan to sell it to the target customer base. If you are looking to expand a company, lenders will want to know how well the existing operations of the company are handled. Your loan will not get approval unless a good majority of your other products are doing well in the market. Therefore, it won’t hurt to supplement your loan application with an analysis from an outside consultant group such as Corporate Business Solutions. If you are seeking a loan to start a company, your business plan should be backed up by solid market research to show lenders exactly how your product will succeed in the chosen industry.
Submit Multiple Applications
Don’t bet all your chances on one or two lenders, and apply for a business loan with several financiers. Naturally, most borrowers go to national banks and large financial institutions for business loans. These types of loans in general have reasonable interest rates and sensible repayment plans. However, don’t limit yourself to such lenders. If a bank turns your application down, consider alternative lenders that specialize in providing business loans. Be aware, however, that such lenders often charge high interest rates. Additionally, don’t overlook small, local banks and credit unions, which offer small to medium-sized loans at remarkably low interest rates. You should ideally submit your application to a mix of such lenders.
If all of the above tactics fail to get you a business loan, you can still try crowdsourcing the capital you need on an online platform like Kickstarter. You can also appeal to investors. Don’t give up; if you follow the above tips, you are highly likely to secure your venture a business loan.