Starting a new business can be a very exciting time. But whatever kind of business you have decided to launch, you might find that you need additional funding to get the kind of brand awareness, marketing success, and growth that you are hoping for. While some business types might grow just fine with minimal investment that you can pay for out of your own pocket, many will require you to go elsewhere and look for a loan or other funding type that you can use to invest in everything you need for your business to thrive. Applying for a business loan can be tricky with various products to choose from and a high chance of your application being rejected if you’re looking in the wrong places. Here are some tips to keep in mind to improve your chance of getting the funding you need.
Check Out Small Business Lenders:
The bank might be the first place you think of when you consider getting a business loan, but the truth is that most banks don’t lend to new businesses without much financial history, and it can be a lot of hassle to go through only for the bank to say no. Instead, check out small business lenders that are designed to fund businesses like yours, where you will have a higher chance of acceptance. For example, AdvancePoint Capital allows you to compare the various loans to find the one that’s best for your business and apply for a product that is most suitable for your needs.
Improve Your Personal Credit Score:
Over time, businesses will build a credit score just like we do in our personal lives. However, a brand new small business that you have just launched will have no credit history whatsoever. To reduce their risk and get a better idea of who they are lending to, many lenders might want to look into the business owner’s personal credit history. This will help them determine what kind of borrower you are likely to be as a business owner based on how you handle money in your personal life. Because of this, it’s a good idea to carefully go through your credit report before you apply. Look for any errors that can be removed, and pay down as much debt as possible if needed.
Get Your Documents in Order:
Any financial documents that your business already has should be prepared for lenders to go through when you make your application. If you have already got any other financial or credit products for your business such as a business credit card, proof of making payments on time each month can support your application. Any regular payments that you make, such as utility payments for your office or business premises, might also be useful. Make sure that your business plan is put together well so that lenders can clearly see what you plan to do with the funds and how you expect them to improve the business.
Create The Best Business Plan You Can
When you go to a lender, the most important thing to show is that you can pay the money back. Your ability to repay the small business loan will drastically impact whether or not you will be approved. The business plan basically stands out as a very easy way to show lenders your ability to repay the loan.
Before you apply, work on the business plan and make sure it is as rock-solid as possible. It has to clearly show how you will manage your cash flow and you will be able to cover all operational expenses and the loan payments you will need to make. Whenever lenders see such information clearly presented, their confidence level goes up and there is a much higher possibility you will be approved for the small business loan you want.
Reduce Debt-To-Income Ratio
This is a great thing to do on both your personal and your business side. Before you will apply for the small business loan, the debt-to-income ratio needs to be reduced. You want it as low as possible because lenders will want to look at this as you apply.
Whenever the debt is way too high as it compares with the income the business generates, the lender believes this is a sign you will not be able to make payments on time.
Maintain A High Daily Bank Balance
There are actually two reasons why you want to make sure your business’ daily bank balance stays as high as you can keep it. For starters, there are some business loans that will be approved based on this balance, not the business income you generate. The second reason is that the lender needs to see your business having enough cash in your reserves to be able to make loan payments in the future.
Boost Your Business Before You Apply For A Small Business Loan
Small business lenders tend to approve loans so much faster for the businesses that manage to generate revenue when the application is submitted. When you recently launched your startup, there is a very high possibility not much revenue will exist to show you are in a great standing. If you are in business for some time and you boost sales before you apply, you give lenders what they want to see. So it makes a lot of sense to boost your sales before the application.
Several things can be done to boost small business revenue. Those that are usually used and are considered to be particularly effective are:
- Getting in touch with an experienced marketing firm that would help you to launch new campaigns that generate sales.
- Running pay-per-click ads and doing it regularly. Then, you can use retargeting strategies to make even more sales.
- Capturing email addresses and then running email marketing campaigns in order to nurture your leads so that they can turn into paying customers.
Keep in mind that these are just three commonly used strategies to boost sales before small business loan application. Several others can be mentioned. It is up to you to find something that will work in your case. The important thing is to prove the loan can be repaid.
Fully Understand The Requirements Of The Lender Before You Apply
Read terms and conditions so you fully understand all minimum qualification requirements for the small business loan before you draft your application. This lets you avoid having to waste time during the application process. Basically, you do not waste time by applying when there is no chance that you qualify.
Obviously, if you meet the small business loan minimum requirements, it is a great thing but your goal should be to exceed them. Simply put, most small business lenders do not want to give money to companies with recent delinquencies, bankruptcies, low credit scores, or poor business revenue.
One important note is that there are lenders that make exceptions and do apply applicants even if they are week with some criteria but stronger in others. For instance, in the event that you had to deal with a bankruptcy 5 years ago but right now the business you manage does consistently bring in very high revenue, you might be considered for a good small business loan.
Applying for your first business loan as a small business owner isn’t always easy. Keep these tips in mind to boost your chance of having your application accepted.
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