4 Things Needed to Get a Business Loan Approvedicopify
There comes a time when businesses have nowhere to turn to but a business loan. There can be many reasons for a business to run out of cash.
And this is when they require immediate means of financing to keep their business wagon rolling. However, getting a business loan is not a walk in the park.
You need to be aware of all the ins and outs of a business loan to be able to get your application approved. Because a large number of loan applications get rejected on a regular basis.
According to business loans expert Lend, “bigger banks approve 23% of loan applications, smaller banks approved 48.7% and institutional lenders approved about 62.8% of all applications.
The reason that not all applications are approved is that business owners don’t know what makes a business loan application strong and acceptable”.
You need to be careful when applying for a loan so that it does not get rejected.
The truth is that if your loan application gets rejected once, the chances of the next application getting approved fall even lower. Hence, you need to be careful.
Let’s have a look…
What You Need to Get a Business Loan Approved
1. Strong Business Plan
When applying for a business loan, a business plan is the first document that lenders ask for.
In this document, lay out your financial projections including what your goals are, what type of business you do, what products and services you offer, past sale projections from at least 2 to 3 years.
Other than that, mentioning marketing strategies and what you plan on doing with the loan money as well. Don’t miss out on any details and prepare a strong business plan.
It should show how you plan on making your business a success and paying back the loan.
Most rejected loans are for a huge amount and are rejected because there is no proper collateral, i.e.: security or guarantee that the loan will be paid in time.
If you do not have a collateral to submit then your application will not get accepted. Other than this, the collateral must be in your own name. It should be of more value than the value of the loan applied for.
It can be a house, business, vehicle etc., but with a solid market value. However, be careful with what you put on the line. Because you may lose it in case you fail to pay back the loan on time.
3. Account Receivables
Account receivables hold great importance for a business, especially when they are in need of a business loan.
These are invoices and money that customers owe to a business. Hence, these can be used as collateral too. It is why lenders often ask for complete details on account receivables from the borrower.
These include sales, account-by-account information and payment history. The details involving account receivables are often needed when a huge amount of loans are applied for.
4. Credit Report
You won’t be getting any kind of business loan if you fail to display your credit report.
Credit reports contain past history of how a business has dealt with finances. It has complete financial information on cash flow and other financial details as well.
Mostly, lenders ask for a credit report to see if the business has had a loan in the past and how they dealt with it. This helps understand a business’s financial standing.
For SBA loans the credit rating needs to be above 700 while online lenders often give business loans for a credit score above 550.
These 4 are the most important things that a lender will ask the borrower to show before approving a business loan.