4 Factors to Consider When Applying for Business Loans
Many entrepreneurs have the creativity, innovative thinking, and capabilities to start a business, but everyone needs sufficient financing resources to breathe life into your blueprints. This is where business loans come into play.
Finding the right funding to get your business off the ground is easy since there are plenty of loan options that cater to different organizational needs, but getting the approval is in a whole new ballpark. To bridge the gap and simplify the process, the list below should iterate factors that improve your chances of success when taking a business loan:
Factor #1: How Much Funding You Require
When applying for a business loan, it’s logical to start with a realistic amount on how much funding you need to jumpstart your ideas. Be sure it’s enough to cover your needs, but taking out larger amounts than necessary can quickly turn into a money-pit since it will compromise your income-to-debt ratio.
If you’re wondering how to categorize your needs, you can divide your capital into three forms: fixed capital for production, working capital for investing in single-use goods, and human capital to cover individual skills, health, and more.
Factor #2: Consider the Purpose of the Funds
Beyond determining the appropriate funding for your business, it helps to identify the whys behind the number. Think about the purpose and expound on how you will use the funds – be it to cover for a launch, a new project, a business expansion, cash flow maintenance, and other specifications.
Factor #3: Realistic Timeframe to Pay the Borrowed Money
Now that you have a definite purpose and amount for the loan, the next step is to draft a realistic projection of the payment period. You can outline a timeframe that suits your capabilities as you sift through the company’s balance sheets, cash flow statements, bank statements, income statements, and other documents that reveal your financial status.
Factor #4: Credit Score
Taking out loans requires a good credit score, so be sure to get a copy of your credit report and guarantee its accuracy before submitting it to the lender. A high credit score of 700 and above increases your chances of obtaining the best deals with lower interest rates. The rate increases for mid-level scores and anything below 600 will likely have a high-interest rate if it manages to get the lender’s approval.
The Bottom Line: Factors Worth Considering for a Smooth-Sailing Small Business Loan Application
Starting a business is a thrilling venture, yet it involves spending plenty of money before you can earn and break-even. When you already have the guts to push your ideas forward, the guide above should help turn vision into reality by providing the factors necessary to aid your application for a small business loan.
How Can We Help?
If you’re on the hunt for a reliable lender, our team at Business Loan Experts can help connect you with the best lending options in Sydney and take the guesswork out of getting the funds you need. Get in touch with us today to see how we can help you select the right loan that suits your business goals.