With so many factors involved in the loan process, it’s hard knowing exactly what to focus on to get approved by a bank. Which begs the question… How can you make yourself seem like the ideal loan candidate?
Welcome to the final installation of our three-part series on how to secure a loan for your small business. In part one we brought you the different types of loans available, part two discussed the 5 mistakes you should avoid when asking for one, and now, we’ll cover how best you can set your business up for banker approval.
Here are 8 tips to help you secure the loan you need…
- Open a Business Credit Card
Arguably the most important factor when looking to secure a loan, is to have good credit, while just like how you can build up your personal credit through a credit card, so too can you do the same for your business.
Gradually increase your business credit score by opening a credit account, and use it consistently each month for simple, reoccurring payments that won’t overcharge – being sure to pay it off in full and on-time each month.
2. Finish Your Forms
Surprisingly, the #1 reason why loan applications are denied, is because the application form wasn’t completed fully, so be sure you take the time to not only fill in all the blanks, but get your financials in order and bring in the right paperwork.
3. Gather References
Though it’s not usually a requirement, a great way to help your application get approved is to have a lineup of references speaking positively about your business and your reputation as an owner – acceptable sources including clients, vendors, colleagues, and business partners.
4. Maintain Your Personal Finances
Many lenders look at the state of your personal finances as well as that of your business, so make sure you have a good credit score, no debts or late payments, and avoid maxing out either your business or personal credit cards as it lowers your score.
5. Make a Good Impression
Appearances can go a long way when it comes to getting approved, while even something as simple as a clean website with a good About Us page, professional responses to both positive and negative reviews, and a vivid online presence can help a lot.
Another tip to show you’re serious about your business? Consider making it an entity such as an LLC or C-corp rather than operating as a sole proprietor.
6. Increase Profits
As any lender looks to be repaid, a strong show of profit is crucial for approval, so be sure to follow up on invoices shortly before meeting with a bank, or even offer clients discounts for advance prepayment.
7. Decrease Expenses
Another great way to increase profits? Cut down on operational costs.
Look closely through your monthly statements and search for any unnecessary subscriptions, research more cost effective equipment, explore alternative payment options for your vendors like offering discounts or a trade, or even break up large payments into smaller monthly ones to make your finances look that much better.
8. Don’t Stop At One
Here’s the thing: not all lenders are the same, and not all have the same priorities. What could be seen as a risk for one bank, could be acceptable to another, so if your loan application gets rejected, try again.
There are plenty of loan options out there, and quite a few lenders who might be willing to give your small business a chance – your job is to simply try your best and choose the right one.