When running a small business, there may be a time you wish you had more money. Even with successful sales, you may require additional cash to move forward with your plans. Whether it is a loan for rent and other bills, fixing a broken piece of equipment or starting an expansion project, your business may have needs that require additional financing. Before you receive a business loan, you’ll need to go through the process of applying. If your business is ready to apply for a loan, we’re here to help! Learn about these six common business loan application mistakes that you should never make so that you can receive a loan for your operations. Let’s get started:
1. Forget to read the lender’s requirements
Before applying, you should do research on different lenders and review their prerequisites. If you don’t meet their standards, they won’t be able to provide you with a business loan. Filling out an application for a product that you don’t qualify for will be a waste of your time. Instead, find a lender whose qualifications you meet. If you are unable to find one, consider working on raising your credit score, meeting their time-in-business requirement, or reaching whatever guidelines that you currently do not meet. Don’t lose hope – with hard work you’ll be able to get your business up to a lender’s criteria!
Filling out an application for a product that you don’t qualify for will be a waste of your time.”
2. Lie on your application
Understandably, you want additional financing for your business. Still, you need to be entirely honest on your loan application. A high-quality small business lender will fact-check your application and will be able to debunk any lies that they find. If you start off being dishonest with a lender, they will likely not be willing to work with you. Remember, they do not want to put themselves at risk by working with a business that either doesn’t fit their requirements or isn’t forthcoming about their financial situation.
Remember, they do not want to put themselves at risk by working with a business that either doesn’t fit their requirements or isn’t forthcoming about their financial situation.”
3. Forget about existing debt
Whether it is debt from a previous loan or other outstanding debt, this could affect your ability to repay a loan. Trying to pay back a lender while also satisfying your other financial obligations could present many challenges. If you have too many debts to repay, you may even have trouble running your business. Although you want additional working capital for your business, it might not be beneficial if the repayment process proves to be too strenuous. If this is the case, try to pay back your debts, and then apply for a business loan once you are in better financial standing.
If you have too many debts to repay, you may even have trouble running your business.”
4. Fail to know your credit score
To most lenders, your credit score will matter. Even if the lender claims to work with business owners with a low credit score, they’ll still need to run your credit. Before applying, you should find out your credit score so that there won’t be any surprises. If your credit score doesn’t meet the lenders’ standards, aim to raise your score. This can be done by paying bills on time, not opening too many accounts and running a responsible business.
Before applying, you should find out your credit score so that there won’t be any surprises.”
5. Being close-minded
Before applying, you may have a certain amount of money or a term length in mind. If the lender you applied to supplies you with an offer that strays from that, don’t immediately decline it. Most lenders look at many different aspects of your business to give you with the best possible offer. Even if the offer is slightly different than you had hoped, you’ll still be receiving additional financing for your business, which you likely need. If you find that you still need additional financing later, your lender may be able to provide you with a more favorable renewal offer.
If the lender you applied to supplies you with an offer that strays from that, don’t immediately decline it.”
6. Not being prompt
When going through the business loan application process, don’t be slow when interacting with the lender that you’re working with. After filling out an application, the lender may ask for additional bank account statements, proof of ownership, information on previous debt, or other documents. If you wait to send these papers in, you are ultimately pushing back the date in which you’ll receive your loan. By taking the time to compile and send in documents requested by the lender, you’re benefiting your business and its timeline for financing.
If you wait to send these papers in, you are ultimately pushing back the date in which you’ll receive your loan.”
Receiving a business loan can be an exciting step for any small business. While the process of applying for a business loan can seem daunting, it will be rewarding once you are supplied with extra financing. Now that you’ve read this post, we hope you are aware of the mistakes that could prohibit you from receiving a loan. By being diligent, honest and organized, you’ll be more likely to obtain financing that is right for your small business!