Applying for a small business loan can be a tricky process, but there are many common mistakes that can be easily avoided.
Read on for some tips on how to navigate the loan process and avoid these common pitfalls.
1. Underestimating Importance of Credit Score
Just because your personal credit score pertains to your personal finances, and not business finances, does not mean that the score is unimportant. Your personal credit history speaks volumes about your creditworthiness, accountability, and financial responsibility. Lenders can get a sense of what kind of individual you are in terms of finances, and how dependable you will be in repaying the loan in a timely fashion. If your personal credit history is poor, chances are you will also be unaccountable in the small business lending world.
2. Applying for the Wrong Type of Loan
Don’t apply for a short-term loan if you need the money for a long-term expense. For example, a short-term loan may be adequate for making this month’s payroll, but it is insufficient for buying a piece of equipment or machinery that your business will use for years to come. Consult a Biz2Credit representative for more information or guidance on choosing the right loan for your small business needs.
3. Not Having Collateral or a Repayment Plan
Before a lender can approve your loan application and offer you a loan, he or she needs to feel confident that you have a plan for paying the money back. Y our business plan should include a detailed explanation of how you plan on making the money to repay the loan; it should also include information about collateral, in case your plans fall through and you don’t end up making enough revenue to pay back the loan.
4. Waiting Until the Last Minute
The loan approval process takes time. It isn’t a good idea to wait until the last minute to apply for a loan because you cannot expect to hear back immediately. Always have a good sense of your business’s finances, so that you can predict when you may need extra funding. That way, you can apply ahead of time, leaving ample time for lending institutions to review your application.
Biz2Credit (www.biz2credit.com) experts are available to small business owners choose the best loan option for their companies. Call (877) 861-2210 and ask to speak to a loan specialist.