Many entrepreneurs have great business ideas that, when implemented, can build a successful empire in the future. But the major problem they face is how to get a small business loan to bring their ideas to reality. To increase your chance of getting a loan, do these things before applying.
1. Assess Your Business and Personal Cash Flow
Getting a small business loan can be less stressful when you have a good financial statement. Lenders will always check your financial statements before giving you the loan. One of the reasons for checking your financial statement is to know whether or not you have the ability to repay the loan when due. So, if you have poor profits or bad cash flow, you need to find a way to remedy the situation. Before applying for a loan, ask the following questions: What are the terms of the loan? And how much do I have to pay on a monthly basis? Now compare that with your cash flow to see if it’s a risk worth taking.
And if you have not been keeping records of your financial statements, it’s high time you started.
2. Clean Up Your Credit Report
Before you request a business loan, you need to first ask for a copy of your credit report and conduct a thorough review. Sometimes, your credit report might contain errors, and if you fail to clear up the mistakes on time, it might have a negative effect on your credit score. Keeping an eye on your credit reports, both business and personal, is essential. The tiniest errors such as a misspelled name or residential address might indicate future problems for you or even potential fraud.
If the error is from a creditor, contact the company personally and report the issue before going to the reporting agency. All in all, make sure you rectify any issues with your credit report promptly. Otherwise, no loan will be approved by your lender.
3. Prepare a Comprehensive Business Plan
No doubt, writing a business plan can be daunting and time-consuming, but it’s definitely worth the effort. A well-detailed business plan will help you secure the loan you seek. It offers you a chance to show what you’ve got in terms of skills and experience. Your business plan should include your business goals and objectives, market research, financial analysis, etc. Remember to state the areas the funds will be geared towards clearly. A great business plan can get you one step closer to securing a small business loan. Check out the Thinking Capital website if you want to learn more.
4. Increase Your Credit Score
Nowadays, every lender wants to be sure an applicant is eligible for a loan. If you’re applying for a small business loan, then you need to have a good credit score to stand a chance. A credit score of 700 and above is excellent. However, a credit score below 680 might make it difficult to get an approval for your loan request. If you have a low credit score, work towards raising the bar before applying for a small business loan.
Follow these steps to increase your chance of getting a business loan.