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Financing Comments 0 Applying for a small business loan can be a challenging process. You need to prove to the lender that you are responsible and capable of paying back the money you borrowed.
One wrong move in a loan application can get you declined. We spoke with the pros regarding key mistakes they see small businesses make that get their loan denied.
Here are the 25 mistakes you should avoid when applying for a small business loan: However, resist the temptation of presenting a less than truthful image of your company when applying for financing.
Eventually, the truth will get exposed and it could hurt your future efforts to secure financing. You need to take the time to file as a business entity and prepare your tax filings and other documents to help expedite the process of your loan application.
Not Being Consistent With Your Information Gerri Detweiler, Education Director, NAV Not being consistent with the information that you declare when filling out a small business loan application can lead to a delay in the process, or worse, a denial.
Information such as the date you started your business, your business location, and financials are very important to lenders. This information can also help them locate your business credit history from commercial credit bureaus.
Those with high scores above have a better chance of being approved for a more attractive interest rate. Before you apply, request a copy of your personal credit report, check for errors, and contact the credit bureau to resolve any issue.
If your score is or lower, consider taking steps to improve it before you approach lenders. When you deal with a broker posing as a direct lender, they may send out your application to multiple lenders, hoping to secure an approval for you.
You may end up with multiple inquiries from direct lenders on your credit report and this will negatively affect your credit score. Most lenders and banks would require a list of documents. If you are not organized, it would be difficult for you to obtain these requirements in a timely fashion.
Also, there is a chance that you will miss something, which can lead to a delay in your small business loan application process. For more information, read our article on how to write a business plan. Always be transparent to your bankers and let them know your story as a client and business owner.
You should regularly review your financial statements so you are aware if your revenues are growing or declining in the recent months or years, or if it shows you can still service the additional debt and be able to repay it comfortably. However, what lenders are really asking for is how long has the borrowing entity been formed or incorporated.
Not Understanding The Different Financing Options Available Jeffrey Bumbales, Director of Marketing, Credibly Some business owners do not take the time to know and understand the different financing options available to them. You have to know that not all financing options are created equal and a fundamental understanding of the different products, rates, and terms will help you identify the best capital solution for your business.
Not Knowing How Much You Need to Borrow Meredith Wood, VP of Content, Fundera Small business owners often see the requested loan amount section of the small business loan application form and throw in lofty numbers to see what they can get.
The problem with this strategy is that business owners often request more money than they make in revenue, which communicates to the lender that their expectations are just too high.
If your business has been established for at least three years and has a documented, steady stream of income, you should not have an issue getting approved by a bank for a loan. Also, the credit score of the majority stakeholder of the business is usually checked and considered. Some lenders can manipulate you to sign loans that could end up getting you in more financial trouble in the future.
Failure to do your research on this essential information can lead you to come unprepared when you meet with the lender to make your loan presentation.
Collateral is a business or personal asset used as a security for a loan. Some lenders will require that you provide some type of collateral.
Pledging collateral mitigates the risk assumed by the lender, increasing your chance of getting approved for a loan.Jan 14, · A business plan is considered a useful tool and a needed part of applying for an SBA loan or other traditional term loan from a bank or credit union.
It demonstrates to any potential lender that. Business Plan Section 8: Funding Request. Sometimes, even if you don’t need a full business plan when applying for a loan, you will be asked for a funding request.
In just 15 minutes, you can be on your way toward applying for a small business loan. Start by telling us a little about yourself.
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