It’s better to be prepared than not prepared at all, especially if you want to gain a business loan. Gaining business finance is hard, but not impossible. And either than the obvious of not having a flawed credit history, what other considerations should you make if you want to increase your chances of getting a business loan.
Here are five tips to consider:
Your business should have low risk tolerance
Banks and other business loan companies assess risk very carefully and grant funds only to businesses which have an extremely low risk of not repaying the loan.
Do you have business or personal asset to place as security?
The assets are collateral, which is security that the lender requires you’ll repay your debt. The lender will then have the right to repossess it in case you are unable to repay the loan. And the value of the collateral must correspond to the level of risk which the lender assumes.
Know exactly how much you need to borrow
If not, you’ll not be able to obtain a loan. Therefore present a complete plan with precise figures. This is a sign that you have planned for borrowing and that you do have serious intentions. When you have a proper plan, you can also consider alternatives to borrowing. If you need equipment, you may be able to share its cost or lease it.
Approach the lender when you don’t need the cash urgently
As this is a sign that the situation has got out of hand and you’ll have the best chances of getting finance when your business is in a stable position with an effectively working business plan, stable revenue and profit and a considerable margin of safety.
Prepare a long-term plan for growth
Financial institutions would like to see that you have already invested in growth yourself in order to support you.