Financial support can open doors for your business – you can benefit from a lump sum of funds to grow, update your equipment and software, or employ and train staff. Applying for a loan can seem daunting, with a list of criteria to be met before you can be approved – but it doesn’t have to be. Read on to find out more about how you can put yourself in the best position for your loan application to be successful.
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Benefits of business finance support
If you own a business, you will be striving to make it a success and applying for financial help can allow you to do just that. Financial support for your business comes in a variety of different forms to suit a range of businesses, whether you’re an established business that needs a bank loan to expand your premises, or you’re operating with bad credit and would benefit from a merchant cash advance. There is something to suit everyone – here are a few advantages that come with applying for business finance support.
- Improve products and services: You can use funds from a business loan to improve the services you offer to your customers, whether that’s investing in your online presence or adapting a product to make necessary improvements
- Employ and train staff: A growing business will need new staff; financial support allows you to pay wages and for training programmes to enhance your customer service
- New equipment: You can use loans to update and upgrade expensive equipment if you don’t have a lump sum set aside to buy outright, it can also free up cash flow
Applying for a loan can be time-consuming, but it doesn’t have to be. Becoming familiar with the dos and don’ts and knowing a little bit about how the process works can help you through the application process. Here are a few ways that you can make sure your application is a success.
Eligibility
When applying for financial support, there are criteria that you will need to meet for your application to be considered, and eventually approved. Here are a few common requirements:
Credit score: this is one of the most important factors – lenders will examine your score, as well as your history as a way of deciding if they think you can safely make the repayments of the loan you’ve chosen, you may also have to provide the credit history of your business too.
Length of time in business: Your lender will also consider how long you’ve been in business. Generally, banks don’t like to lend to businesses that aren’t yet established or have been operating for less than two years – but other loans could be an option for a smaller, newer business.
Revenue: Lenders will also ask about your annual business revenue as you will be required to meet a certain income to be considered for your support. You may also have to provide your debt-to-credit ratio so that lenders know you have personal funds to turn to if your business runs out of cash.
Information and Documents
You may wonder why your lender requires so many documents when you’re applying for your loan and gathering everything you need may seem like a chore, but the more up-to-date and relevant information you provide, the better chance you have of being approved for your loan in the quickest time.
Some of the documents you will need in the approval process include any bank statements, which the lender will use to verify your financial position, as well as personal and business tax returns. You will also be required to provide any personal financial details including your credit score. Sometimes, you’ll be asked to provide a business plan, so the lender knows where your business is currently, and where it is projected to be in the future.
Mistakes to avoid
If this is your first time applying for a business loan, knowing where you might go wrong and recognising things to look out for could help you during the process. Avoiding these common errors will help you when it comes to being approved.
Be truthful: The first and most important mistake to avoid is not being truthful. Whether it’s lying on your application or applying for a loan that is out of your reach financially, you are hindering yourself and your business from receiving support. Being truthful is beneficial for you – it means you’re less likely to end up in financial difficulty
Meet deadlines: Keep a close eye on deadlines. If your lender has asked for a specific piece of information or a document within a certain time frame, it does not look good if you can’t meet their needs. You are trying to convince your lender that you will pay them back on time, so missing deadlines does not look good.
Credit score: Pay close attention to your credit score, and don’t apply for a loan you will be automatically disqualified from – this will waste your time and delay the funds you need to improve your business.
