Initiating a business especially in this economic crisis is not an easy thing to do. Times have changed and a very few people, if any have the assets to start the business on their own.
This is why; almost everyone needs a business loan. However, business loans aren’t easily granted because so many small and large companies are seeking them, the guidelines for giving one have become stricter and so not everyone that goes to a bank for a business loan comes out with one. A large percentage of applicants will be approved for loans simply because their business doesn’t have any credit yet or has bad credit.
Now although there are no sure recipes for getting the business loan, there are a few things that you could do to make your chances of getting the loan higher. Before you apply for a loan, here are some of the questions that you will need to answer to the bank where you are applying.
How much money do you need?
You cannot apply to a business loan unless and until you do not know the amount which you will need. Keep in mind that before going on the venture for a loan, you will have to sit down and decide about the kind of investment that needs to be made. Don’t think your loan request is too high or too low because banks deal with this kind of things on a daily basis.
What will you do with the money?
Next, the company where you have applied for the loan will also probably want to know where you will be spending the loan that is being granted to you. For example you may need it to make recruitments or other business related actions, or may need it to pay off business debts. Whatever the case, you need to be clear on why you are asking for the loan.
When will you be able to return the loan?
A big question every single bank will ask you is that when will you be able to pay off the loan that you are applying for. For this purpose, it is very important that you be confident and explain to them that this loan would be a stepping stone for the building of your organization. Here, you will probably be asked to show some proof of a financial statement or cash flow projections.
Therefore, remember that when you are on your way to ask for a loan, these are some of the questions that almost every facilitator is going to expect you to answer. However, there are some mistakes that business owners often make when applying to a business loan. Although these mistakes are very basic, they are also very common and come up as being the primary reasons why business loans get rejected.
- Know your credit report: Mostly, the reason why a bank rejects your business loan is because you do not have good credit scores. So, if you want that loan, the first thing that you need to do is to get the record of your scores (from at least 2-3 credit bureaus), so that the bank knows that your business is worth the loan.
- Don’t make changes: Prior to applying for the business loan, you shouldn’t be making any major changes in your company or business. For example don’t alter your business structure or it will appear as if your business isn’t stable enough to receive the loan.
- Read the terms and conditions carefully: More often than not, business owners end up signing to a document they do not properly understand. Yes your loan has been approved and that is great, but before signing any kind of legally bounding document, you need to make sure to read and understand the terms stated carefully.
- Decide on an interest rate: A major part of your loan is the interest rate, but people don’t seem to judge just how crucial it is. You must remember that interest rates change, but if you keep hoping for the rate to go further down, you are not going to end up anywhere. Once you have a rate which you can comfortably copy up with, don’t wait for the next, lock it and you are good to go.
In the end, you just need to remember that business loans are not granted easily. So, to display the right professional image, you need to be confident. When you first apply for a loan and get rejected, don’t be disappointed, instead ask them why they rejected it and learn from what they tell you and apply elsewhere.