You are applying for a business loan to access funds to grow your business. It is not a decision that you made lightly. To find out the 10 common business loan application mistakes that you can avoid keep reading.
1) Not Checking Your Credit Score
The first thing you need to know is what is your credit score. You won’t know if you qualify for a business loan if you don’t know your credit score.
You also won’t know which lender to approach without this information. This can waste time and resources that could have been used to build your business.
2) Signing Before Carefully Reading The T&C’s Of The Business Loan Application
If you are in a rush to get funds for your business, you might miss important details on the loan contract. This could cost you in the future if you need adjustments.
So take your time reading it. If you do not understand something completely, ask until you are satisfied. It could be a matter of life or death for your business.
3) Not Getting A Rate Lock
Finding a good interest rate is like finding gold. If you don’t lock it in, the rate might go up and could mean not being able to afford the loan.
This common application mistake is caused by the fear of missing out on a better interest rate. But if it is low enough for your business to succeed, lock it in.
4) Not Describing Your Purpose For The Loan
A common business loan application mistake is not giving the lenders the reason for your application. They want to know where their hard-worked money is going.
5) Making Changes During Your Business Loan Application
When applying for a business loan, you need to build the trust of the lenders to prove that you and your business are stable.
They will not trust your enterprise if you are making major changes that might affect the outcome or use of the funds. So don’t alter the business structure or make significant personal changes while applying.
6) Not Shopping Around For A Lender
Applying for a business loan is an investment in your business. So if you just go to the local bank and apply, you will not know if you are getting the best deal.
Besides, there are many credit unions and other sources that you need to look at that could get you a good deal.
7) Not Doing Your Financial Housekeeping For Your Business Loan Application
This is the most important application mistake you do not want to make. Lenders will not approve your application if you cannot even keep your finances up-to-date.
Your financial information proves to the lender that your business has enough cash flow to afford a loan. It also allows you to predict how a business loan will grow your business.
8) Not Providing A Business Plan
Keeping in line with housekeeping. Not having a concise business plan will result in a rejection. Knowing what your goals are and how you plan to use them to make money is great.
But the lender does not know this. They want written proof of how your business plans to use the funds to grow. And go into as much detail as is necessary to prove that your plan will work.
9) Not Having Any Equity In The Project
The lender will want to know that you are invested in the project. And lenders only invest in a company whom they can trust.
Therefore, this personal touch that you bring to the party gives them the confidence to approve your application. If you are not interested in the project, they are not interested in giving you a loan.
10) Not Having Collateral For Your Business Loan Application
Having collateral gives the lenders confidence that they will not be affected even if you default on your payment. Therefore, if you cannot afford collateral, you might have to accept a higher interest rate.
How To Prepare The Best Business Loan Application To Get Approved
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.