Business Loans: Increasing Your Chances of Approval—What to Know
Banks are very cynical organisations when it comes to lending money. Securing a loan for your business can be a daunting task that takes a lot of work to convince the bank!
Unfortunately, it is true that the entrepreneurship field is cutthroat, possibly leaving banks who lend money at a loss if the business fails to prosper. This uncertainty in the field of entrepreneurship is what drives banks to seek out all necessary requirements before granting that coveted loan.
Despite this challenge you need to surmount, business loans are essential if you plan to grow your company without shelling out too much of your own money. Smaller enterprises will be subject to more scrutiny due to the difficulty of the field, which may prove difficult to get a loan!
When you are applying for a small business loan, the bank will ask for a few things. To help you streamline that process and gain a higher chance of getting approved, ensure to prepare the following things:
All types of loans will require a plan document. This plan should be a summary of the company details, product, market, and financials. Take some time to prepare this and iron this out. Prior to rushing in, it’s wise to ask advice from business experts to review your plans to ensure that it’s sound.
Rushing into a business loan without a plan is a surefire way to get shut down. A plan will ensure the bank that you know what you are doing with their money and that you have a plan to pay them back.
Collaterals exist to reduce the bank’s risks when lending money to a small business. It can be easy to run away with large sums of money—which is why collaterals are there to prevent extreme damages on the bank’s end.
Hard assets must be offered in some cases to back up the loan for a business, which banks will take a very long look at to see if these can reduce risks. Aside from reviewing for legitimacy, they will also assess whether the assets being offered are actually worth their time to collect, and not just some old or obsolete inventory that won’t ease the overhead costs.
The usual pledged asset by small business owners is house equity, which is commonly used to achieve a business loan.
A Complete Summary Of Financial Details
For this, the bank will look at all current and past loans, as well as incurred debts, bank accounts, investments made, credit card statements, and other tax documents. The more comprehensive the summary is on financial statements, the easier it will be to get a loan. This will be even stronger if your financial details have been audited and reviewed for legitimacy and completeness.
Complete Accounts Receivable Details
Your business’ accounts receivable must include the aging, account-by-account information, as well as the sales and payment history. The fewer accounts receivable details you have to deal with, the better it is—so if you don’t see any, breathe easy!
Complete Details On Accounts Payable
These are similar to the previous point on accounts receivable, but have added credit references, and will check companies that sell to your business for vouching.
Personal Financial Details
Personal financial details are also viewed when it comes to business loans. Banks will view your social security numbers, net worth, credit card statements, investment accounts, assets and liabilities, auto loans, and other financial documents from your personal life. A better overall standing without debts and a higher credit score will make it easier for banks to provide you with a business loan.
Business loans can be daunting to file for, but if you provide the proper and comprehensive documentation for your finances and business plans, it will be easier to secure loans. Banks are cynical, and will always expect the worst from the ones they deal with. By making sure everything is filed correctly, the procedure will actually be quite quick and easy.
If you’re looking to get a business loan in Australia, then look no further—Business Loan Experts has got the solution for you! With our expert background, you can eliminate the stress of getting a loan—we’ll help you find the right loan plan for your up-and-coming enterprise. Whether your business is just on the baby steps to starting or about to kick off, we can help you find an ideal loan from a reputable lender as soon as possible! Get in touch with us and see how we can help you finance your business today!