The act of applying for a loan whether it’s a personal one or a business loan can both be intimidating and worrisome. That’s because the process can be tedious and any mistake could also put a negative impact on your finances and reputation. That is why it’s important to be knowledgeable about the application process.
Here are some steps and tips you could use to prepare the best business loan application. This way, you’ll have higher chances of getting approved.
Organize and prepare all of your documents and finances for the best business loan.
Getting started is easier than most would expect. The first thing you have to do is to organize all of your finances including your business documents. Usually, most people are afraid of starting because of the amount of information required for the application. Get things out of the way by doing it.
Another is understanding your options. Here you need to make your own research on the types of business loans, the pros and cons of bank loans and online loans, and the process of application. Collecting this information will help you make a responsible and informed decision.
Know your needs and limitations then decide based on your research.
It’s important that you are well-aware of your needs as well as your limitations to guide you on your decision. For traditional bank loans, the transactions are definitely more secure especially if you already have an existing relationship with them. You are more comfortable with the process and you can easily ask questions about it.
But now, there are also online small business loans that you can tap. This is more preferable for those who can’t meet bank requirements. Additionally, one application here can lead you to multiple lenders and they also have fast transaction processes.
The major limitation to get a bank loan is your eligibility as they have stricter standards. You should also consider how fast you need the money. Bank processes usually take days and even weeks or months depending on your business loan. So if you need it right away, then an online transaction would be more suited for your need but they are more expensive.
Start your lender search for the best business loan.
Each lender requires different documents and also have different standards. The first thing lenders consider is the proposed loan amount. More often than not, lenders will only loan as much as 12% of your annual revenue.
The next thing they would want to know is the purpose of the loan. Acquiring a new business or buying out a business partner would be more difficult to get approved compared to a business credit line or business expansion. Make sure that you are clear with how you intend to use the loan.
Credit score, annual revenue, average bank balance, and profitability of your business are also very important factors that they consider. A good balance among these factors can increase chances of being successfully approved. A strong credit score and healthy finances but low business profitability can lower the chances of getting a loan.
Lastly, loans also depend on your business industry. There are certain industries that most lenders categorize as riskier so it’s best to know whether they’re willing to work with the industry that you’re in.
Be accurate and transparent with the information you provide.
It’s best to have a good working relationship with your lender whether it’s a bank or online. To do that, make sure that all the information you say and provide is accurate. Any discrepancies can put doubt on your application.
Also, it’s better to be thorough with the information you give and prepare other supporting documents aside from the required ones. And if asked for a follow-up, make sure that you provide it right away.