Applying for a loan can be a challenging process. It requires your time, commitment and best efforts and even then, your request can still be denied.
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To help you present a better business loan application and increase your chances of success when next you apply for that loan, here are 3 common mistakes small business owners make when applying for loans.
- Poor Preparation– Majority of small business owners don’t take time to prepare their businesses for the loan process. This lack of preparation shows when they rush to the bank or any other lender immediately they’ve made up their minds to apply for a business loan. This is one of the common mistakes small business owners make. Typically a business ought to be prepared to provide an up-to-date financial statement and business plan. They have to have done sufficient research to know what their personal and business credit score is, so they know where they stand, what the lender’s requirements are, the exact amount they need for their business and a plan for how they intend to spend it and repay their lender. When your lender does not see a convincing level of preparation then there is a high chance that your application would be denied.
- Choosing The Wrong Lender/Loan Type– You cannot walk in to the first bank you see or that is most convenient for you to apply for a business loan and expect the best offer. You have to carry out an extensive research on all your available loan options to avoid the mistake of choosing a wrong lender and loan type for your business. Some lenders are better suited for some type of businesses than others, some loan types are better suited for your current business financing needs than others when you don’t choose the proper lender and loan type for your business you stand more chance of having your loan application rejected, paying higher costs in interest rate, and time. This is why it is important that you invest time into seeking out the most suitable lender and loan type for your business.
- Seeking Finance When It is Too Late – When business owners wait till it is too late to ask lenders for finance, they become desperate in the process. This makes it easy for them to make more mistakes along the way and this desperation is clearly seen by their lenders which definitely has a negative impact on their application. Waiting till the 11th hour when your business has a very short runway to seek a loan is a deadly mistake that almost always guarantees that your application would be denied. Stay on top of your finances and know what the financial health of your business would look like months ahead and make adequate preparations to meet its financing needs before it is absolutely necessary.
The first step to avoiding most business loan mistakes is to prepare yourself for the process and the requirements. This will help you choose the right lender and loan type, and present a more convincing loan application and stand a better chance of succeeding in your business loan application.
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