If you are a small business owner looking for a small business loan, getting approval requires some effort from your side. Preparing yourself well before you apply will lower the chances of rejection. Every lender thoroughly evaluates every application and then takes a decision of accepting or rejecting the loan request.
Want Your Loan Approved? Avoid These Mistakes!
1. Waiting till the last moment to apply for a loan
Some of the business owners apply for a loan when they realize that their business won’t survive anymore without some funds but this is risky. It takes a minimum of 30 days to avail a business loan, since you have to spend some time in searching for the right lender, getting your documents ready, applying, and then the final step of loan disbursal.
2. Not checking the credit score beforehand
Credit score of the loan applicant is an important aspect for business loan approval. The lender checks the credit score of the business and the loan applicant to understand the credit history. Any issues in the credit report can cause rejection. So, the business owner has to be ready with the credit scores before applying for a loan.
3. Applying for multiple loans at the same time
Many business owners make a mistake of applying for multiple loans at the same time because of the perception that this will increase the chances of loan approval. But this affects your credit score and also decreases your chances of getting a loan.
4. Not keeping the documents ready
The loan applicant has to submit some required documents including the business plan to the lender. The business plan will include why this loan is needed, how will the loan amount be used, and the profit projections etc. , the loan approval will depend on the submission of all of these documents.
5. Failing to provide a strong asset as security (for a secured loan)
When applying for a secured loan the business owner has to give something as security to the lender. For faster loan approval one has to keep an asset as security which has a good market value.
6. Not deciding the loan amount or purpose
If you are not certain about the usage of the loan or of the loan amount you need, you won’t be able to decide on the right loan amount, this may result in you taking less amount of funds or excess funds which is not good for your business.
7. Not updating the business accounts
Before applying for a business loan, every business owner has to have proper data of the business accounts (including profit & loss, any previous loan repayment history etc). Business account information of at least 2 years is needed at the time of loan application. If that is not the case, the lender will believe that the owner can’t handle the finances efficiently which will reduce the chances of approval.
8. Signing the agreement without reading it
The business owner should read the terms properly and clarify any point in case of a doubt. It is better to take some help to understand the terms of the loan clearly.
9. Not paying enough attention to the interest rate
Always pay attention to the interest rate as it might fluctuate with the market variation. If you feel you have got a loan at a good interest rate, and that this rate may increase in the coming days, you can fix on an interest rate for a period of time by paying something extra.
10. Not doing any research to find the best lender
There are many lenders in the market and proper research has to be done to select the right one. Going to any lender without knowing the eligibility criteria of that lender and the other requirements, may result in loan rejection, therefore, carrying out research on the potential lenders is a must.
If you want a loan for your small business, contact Gromor Finance for unsecured loans at affordable interest rates!