Applying for a business loan can be frustrating. Not to mention the stress you may experience while trying to decide if you’re going to ask for one or not. You have to understand that the bankers need to protect themselves and earn money to keep their business going. So, if lenders will see you as someone who’s going to be risky, you should be ready to be rejected. Not to worry, here at Bookminders, we are here to help and we’ve prepared three useful tips to ensure that you improve your chances of getting a business loan.
All bank, lenders, and creditors have their criteria in approving business loans and make sure you are not a risk. The first thing that they’ll check is your credit score, and if your score is appaling, then they’ll deny granting you a loan. If you already know that your credit score is low, we don’t suggest applying for a business loan.
A few ways to improve your credit score:
- Make sure your credit reports are accurate
- You should check your credit reports because frequently they have mistakes on them.
- Fix your late payments
- Closing your account with credit balances won’t fix your late payments; your best bet is to plan how to pay back all your credits and loans and pay off all the interests that come with them.
- Get a credit card
- If you’re one of those people who has avoided credit cards, you should get one now. Avoiding getting a credit card can make creditors think that you’re afraid that you’ll be unable to handle paying your credit obligations. There are many great points and offers you can receive with a credit card and it can increase your credit score if you pay your bills on time.
A Contingency Plan
A contingency plan can be useful when applying for a loan. The bankers need to know that you will be able to pay them back even if your business fails. They need to see that you’re someone that plans for positive and also negative possibilities.
Most of the time, in times of disaster you’ll make decisions in a panic. Having a contingency plan will also let you decide correctly; you’ll be able to respond quickly and deliberately.
Relationship with Banks
It would be smart to form relationships with different banks. This will help you spread your risks and lessen your dependency on a single financial institution.
Also, having more than one connection with banks will let you have more choices to pick from. You will be able to shop for different business loan options and choose one that fits your financial needs. Referrals never hurt, I remember after banking with the same bank for years I was denied a mortgage because I was self-employed for less than 2 years. As frustrating as this was, I did not give up. I eventually name dropped at a credit union, not only do they have my mortgage but I have moved all my assets and savings into their bank.