Alternative Loans Available to Re-Opening Businesses
December 01, 2020
The U.S. Small Business Administration (SBA) revealed that it loaned business owners more than $28 billion during its 2019 fiscal year. This tells you that most small business owners consider loans as a reliable way to help their enterprises grow.
However, qualifying for a small business loan isn’t an automatic process; financiers consider several things before approving a loan. Below are tips to help increase the chances of your loan being approved.
Though a business loan is what you’re interested in, the lender might examine your personal finances. Among the areas that they will mostly focus on is your credit history to know if you are a high-risk borrower or not.
According to a report by the Consumer News and Business Channel (CNBC), credit score determinants include payment history, amounts owed (credit utilization), credit history length, account mix, and credit inquiries (new credit).
Generally, payment history covers 35% of a credit score, while amounts owned accounts for 30%. These two are the top determinants of your credit score because the rest account for less than 15% each. As payment history has the highest percentage, paying all your outstanding bills on time will work in your favor.
Reducing credit use can also help get a better credit score. Ensure you consult a trusted financing company for insight on other ways of improving your credit history.
Not a single financial institution would want their money to go to waste. Therefore, you should give the financier a clear picture of how you intend to spend the loan. Refrain from providing vague explanations and give realistic details that can help during the loan approval process.
Some prudent ways of spending loaned money include:
For example, if you want to expand your company, outline the amount you plan to spend and the expected return. Mentioning a loan repayment timeframe is also a good idea. Such details are crucial because they let the lender know you have a clear plan to guide you from the beginning to the end.
You need to provide all relevant documentation that the lender needs for loan processing. Doing so helps them know that you are organized and have what it takes to qualify for the loan. Remember that some lenders might view unorganized individuals as risky and unprepared.
Inquire from your lender about all the documents they will need during the loan approval process. The most common documents required are tax returns, balance sheets, inventory breakdowns, business licenses, bank statements, and employer identification numbers (EIN).
A common adage states that failing to plan is planning to fail, which is true when you need a business loan. A business plan serves as a road map to ensure your company stays on track at all times. Your business plan should highlight your company’s products and services, market and competition analysis, and operation plans.
You might not get a business loan immediately after filling out the application form. The financier might need some time before approving your loan, which is why you should begin the process early.
This tip will keep frustrations at bay because you will receive the loan in good time. However, some lenders can approve your loan within a short time.
If you wonder how to make your company thrive, you can never go wrong with a business loan. These tips will help make the application process easy. At Sheer Funding, we take pride in helping our clients access the business capital they need. If you need a loan to boost your business, contact us right away.
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