A business loan is an excellent way to refinance your company and pay off debts. With extra funds in the bank, you can concentrate on growing and expanding instead. Unfortunately, securing funding from a lender isn’t easy, even though there are twice as many options for SMEs.
Banks are picky, which means you have a 45% chance of having your application rejected twice. The last thing you want to do is fall into the category of entrepreneurs (23%) who don’t know why their request was turned down.
Understanding the reasons behind a lender’s decision enables you to tweak your application so that it’s accepted. Here are the areas to focus on, and how you can do it.
Asking for Too Much
A can-do attitude is essential to success. Targeting the best loan on the market is your only goal, and there’s no reason you can’t hit this target in your mind. Lenders, while they may admire your courage, are more risk-averse. As a result, they won’t sanction amounts that are way out of your price range. Usually, earnings and your credit score dictate the figure. How do you get around this roadblock? You use an American Capital Express broker. Brokers research and compare a combination of loans to help you secure the most suitable. Using a brokerage service stops you from wasting time applying to lenders that won’t give you money.
Applying to the Wrong Lenders
Bad credit looks bad on an application, so much so that some banks won’t deal with you unless you have a certain rating. The good news is that your score isn’t a death sentence. However, you must be careful about which organizations you apply to, or else you’ll be denied a loan. As an extra kick in the teeth, the hard check will lower your rating further. Understanding whether your credit is healthy or unhealthy will highlight the types of lenders that are likely to go into business with your company.
One way to get around a poor credit score is to put up an asset as insurance. Investopedia says that collateral works as a safety net for lenders because if you fail to pay, they’ll take the asset to offset their costs. Sadly, you may not have anything of value that you are willing to gamble. Your property should always be off the table, yet you can recommend your car. Cars, while expensive, aren’t essential to everyday life if you’re willing to use public transport.
Too Much Debt
Debt is another factor lenders consider before accepting or denying a loan. If you’ve already got lots of creditors, the odds are high that the business won’t have enough liquidity to pay them all. But, if you structure your arrears strategically, Debt says that it won’t look as risky. This is because not all debts are created equal, with good obligations being better than bad ones. Good arrears increase the company’s worth – buying commercial property – so you should apply for loans with these purposes in mind.
Plus, office space simultaneously acts as collateral.