It is very common for business owners to consider taking a loan either as a startup trying to launch or even as an existing business trying to scale up by launching a new product, buy new equipment, rent a bigger space or hire more staff, just to name a few; as a business owner you need to understand the key things a lender will look out for in your application when making a decision on your loan.
- CASH FLOW
This is the amount of money that goes into your business and also out of it. This is one of the vital things any lender will look at in your loan application because this gives an overview of how health your business is and confidence in your business to be able to pay back. The amount you apply for in your loan should be determined by your cash flow because requesting for an amount that is way more than what your business can handle only makes you lose credibility.
An insufficient cash flow is a flaw in your application most lenders can’t afford to take overlook. Therefore, before applying for a loan, you will need to know the best amount fitting for your business based on your cash flow and you can seek the help of a financial planner or consultant to know this.
- CREDIT HISTORY
This shows your credibility as a borrower. How well have you been able to pay back previous loans and the consistency in doing this on time without defaulting on the agreed time.
Depending on the amount you are requesting for and if you are first time lender, a lender might be a bit skeptical about giving out a loan without knowing if you are good for it.
It is advisable to take “convenient loans” from family, friends or business colleagues that you pay back without any hassle as a build up for your credit score. If your credit is still far from ideal after you take these steps, you should consider nontraditional financing options; they tend to place less emphasis on credit scores before giving out a loan.
- A BUSINESS PLAN
A business plan is one of the most creative ways to show your lender you know what you are doing. It is advisable to have a well-prepared plan that documents what our business is about with financial information and projections. By showing your lender everything you are up to and how his/her money plays a key part in helping you achieve that and much more how you plan on repaying it, you are taken more seriously and possibly gain trust, which helps plead your case in getting that loan approved.
It is also encouraged to seek the assistance of a business consultant in putting together your plan.
- MULTIPLE LOAN APPLICATION
As a business owner, applying for as many loan as you find reachable to you all at once just to tip the scale of one going through in your favor might actually be what will hurt your application as this can be a red flag and seen as nothing more but desperation.
It is therefore suggested to keep the number of loan application minimal and go after the most favorable ones that show support to your kind of business or fit the kind of loan you are applying for.