If you are a business owner, more often than not, you have already pondered over the idea of financing your business. People apply for business loans for various reasons. These could be to have a working capital, to invest in machinery, to getting a bigger space and expanding the business, and many others.
The decision of actually taking a business loan depends on a lot of factors. You need to evaluate the return on the investment and the time period required to recover the loan amount. You also need to consider if you really need the loan, and how fool-proof your repayment strategy is.
But once you have made the decision to request business financing, there are a few things to take a look at before applying for the loan. Remember that whether you get a loan or not, and if you get a good deal or not, depends on a lot more things including the ability of repaying the loan amount. From filing your application to making sure this will be a safe bet, there are a lot of things you can do that can help improve your chances of coming out on top when the transaction ends.
Below, we list some of the things you can do to improve your chances of being successful at financing your business.
1. Know Yourself
The best thing you can do to improve your chances of getting a loan is to know what you need the loan for, how you will use it, your plan on returning it, and every minute detail that you think can be asked about during the process. There is nothing worse than a lender seeing someone who doesn’t have a plan in place or doesn’t know what they will be doing with the money.
2. The 5 C’s test
A simple way to make sure you come across as a strategically sound person is to know the 5 C’s that the lender will look for. This includes the capital amount you will need, you capacity of repaying the loan, the current financial condition of your business, the collaterals that you can make available to secure the loan, and your overall character as a business owner. A red flag in any of these aspects can quickly turn the lender away from you.
3. Your Credit Score
It is really very simple. A person or business with a great credit score is far lesser of a risk for a lender compared to an individual or a business with a bad credit score. A good credit score is the easiest most direct way of proving that you are not only capable but also intend to return the money you take as loan. In fact, having a great credit score can be the leverage you need to bargain for a better deal on your loan.
4. Cash In Hand
Like most other kinds of loans, you will be required to make a down payment upfront and secure the loan. Also, businesses with considerable and consistent cash flow are more preferred by lenders. The cash flow is mostly taken as a sign of stability of business along with the security that the loan amount can be repaid without going through a lot of troubles.
5. Connect With The Loan Officer
Most loan officers will modestly tell you that they have no call in the details and deal of the loan you get. Don’t take their word for it. If you can form a connection with your loan officer, do not give up the chance. You will be surprised how much of a positive difference that can have on the loan you get.
And there you have it. The main thing to keep in mind is that you only need to prove that you will be returning the loan amount in a timely manner. Once you do that, you are just a few formalities away from securing the loan you need to take your business to the next level.
