Small business owners have to go through frustrating and complicated long procedures in pursuit of a loan from lenders, despite the fact that their small businesses form the core of any economy. Small business is often disqualified during the application process, as lenders aim at making a profit and not being charitable to businesses.
There are key things any applicant for a small business loan ought to familiarize themselves with, so as to increase their chances of qualifying for the loan.
Viewing the process from the lender’s point of view.
Thinking of the whole loan application process from the lender’s point of view allows the applicant to gain a broader scope of knowledge and insight about the loan. The borrower will understand the need for collateral, as it depicts one’s belief in the business as well as issues of cash flow and credit quality. Professionalism and presentation also matter in convincing a lender. A borrower should also understand that all a lender wants is reassurance that the loan he is giving will be paid back, principle amount and profit. Documents also increase chances of loan approval
Amount required
It is important to be economical when coming up with the figure for application, as the higher the amount the lower the chances of getting the loan. It is proper to seek an amount that the business actually needs, not more.
Evaluation
Learning from previous failures during loan application is key. It helps to break a cycle of failed applications. A mistake done previously should be identified and corrected before approaching the next lender.
Poor credit
Those receivables in a business may be used as collateral when applying for a loan in case of poor credit. Alternative lenders include Internet lenders, who may charge higher interest rates but with more flexible and relaxed standards and requirement.
Small Business Administration-backed(SBA) Lenders
These are not lenders, on the contrary, they make it easier for banks to give loans by mitigating the lender’s risk when giving a loan.
SBAs offer lower interest rates. It should be considered first because of how it is operated so that being rejected by the one lender does not cancel out the possibility of being given the loan by a different SBA lender.
Understanding the Implications of the loan
One should know the rate soft payment, known as the Annual Percentage Rate (APR), the different types of a fee charged and penalties involved. Collecting relevant information is helpful to the loan applicant.
Alternative sources
Online lenders may entice the borrowers who have bad credit with their quick procedures and fewer requirements while charging higher interest rates. Their terms are not customized for different types of lenders and are onerous. These lenders also lack transparency in their operations.
Approaching a smaller bank may be of advantage to the borrower as opposed to a big bank. Big banks have a preference for larger customers who deposit and borrow large amounts of money.