Every entrepreneur wants to start a business and see it grow in leaps and bounds. Here, planning and procuring a business loan can be an effective way to expand your business.
If you’re looking to apply for a business loan, below are ten tips to improve your chances of securing one:
1. Present a solid business plan
Having a sound business plan is your best shot at getting a loan. As such, it is important to present the complete plan. Usually, banks and financial institutions tend to look at the first few pages of the business plan. If they are impressed with what they see, they will surely approve your application.
2. Put in your own money
It is important to show your confidence in the overall business. There’s no better way to do this than by putting some of your own money on the line. Typically, it would be a good idea to have at least a 25 percent equity stake in the business before you look for finance.
3. Check your credit score
A good credit score is a great way to boost your chances of getting a loan. All lenders will assess their risk, and check your credit history before deciding on your ability to repay the loan. So, it would be advisable to maintain a sound credit score.
4. Calculate how much to borrow
It is important to know exactly how much you want to borrow and how it is going to be repaid. That way, the lenders are assured that you know your numbers.
5. Get your paperwork in order
Your bank or lender will want to look at several years of income tax returns, legal documents and your balance sheet. They will also assess debts, if any. As such, one should always display the true financial standing of the company.
6. Rent over buy
Lenders tend to also prefer to finance businesses that plan to rent rather than purchase a property. This is because they would rather see you invest in assets that accumulate income, like machinery, inventory and equipment.
7. Explore all options
Before you apply for a business loan, it would be wise to explore all options available in the market – and make an informed decision. Before selecting a bank or lender, you can consider factors such as convenience and personalised attention offered by them.
8. Reach out to professionals
Given the nature and complexity of your business loan, you may also choose to seek and benefit from the advice of professionals and people in the field. They can help review your file and ensure that you are better prepared for the loan application.
9. Don’t get discouraged
We all learn from experience. In case you are unable to secure a loan from a lender – and if the reasons are out of your control, don’t get disheartened. There are always other options to consider, such as pursuing a loan through a non-profit organisation or community development lender.
10. Be aware of any hidden charges
Before signing on the dotted line, it is important to review the contract document thoroughly, or have legal professional take a look at it. That way, you can avoid getting stuck with any hidden fees or charges.
When taking a bank loan for business, you can carefully consider the above aspects before making a prudent decision.
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