There are many reasons why you might be considering applying for a business loan. Depending on the industry and type of business that you are planning to launch, you may need some substantial extra capital to achieve the success that you want as an entrepreneur. The most common, traditional method of doing this is by applying for a business loan. However, you’re unlikely to have much luck by simply walking into the bank and asking for one. To put yourself in with the best chance of success, it’s important to be fully prepared. We’ve listed some top tips on how to best prepare for your business loan application.
Tip #1. Improve Your Credit Score
Before you go ahead and apply for a business loan, you will need to take your personal credit score into account. If you have a history of always repaying your personal credit on time and being sensible with your borrowing, then you are going to have a much higher chance of acceptance when it comes to getting funding for your business. On the other hand, those who have had a history of credit issues, for example missed payments or defaults, may be more susceptible to issues with lending. Be aware that even historical issues may pose a problem; your credit information remains on file for around six years. So, even if you have managed to get on top of your debt during that time, the past could come back to haunt you.
Tip #2. Write a Solid Business Plan
Failing to provide potential lenders with a business plan at the point of application will never go in your favor when it comes to being accepted. When lenders are asked to provide you with a large sum of money on the basis of trust that you will repay it within the given guidelines, they want to be sure that they are not risking losing it all. To do this, they will take your business plan into account; your turnover right now is not the only important factor since they will want to be sure that you have planned enough for the future and are able to give an informed prediction about the kind of profit you expect to be bringing in months or even years down the line.
Tip #3. Consider Alternative Routes
Even if you have a great credit score and a shining business plan, this won’t always guarantee that you are going to be accepted for business funding. On this basis, entrepreneurs should make sure not to rely on the first lender alone. Before you apply, it’s a good idea to research alternative methods of business funding and decide which is the best option for you in the event of your bank rejecting your application. For example, you may want to consider crowdfunding or angel investors, which does not normally require your credit score to be checked. On the other hand, depending on your current turnover and time in business, you might want to consider looking online for providers such as Fundera.
Tip #4. Work Out Your Repayment Plan
When you approach a lender with your request for business funding, having a clear plan in place regarding how you plan to repay the money can help to improve your chances of acceptance. In addition, this will also help you to ensure that you don’t borrow more than you or your business can afford to repay. You should also take this opportunity to allow for any risks or possible losses of income that your company may experience in the future.
Are you currently preparing to apply for business funding? We’d love to hear from you in the comments.