Acquiring funds often plays a crucial role in setting up a startup. However, it can be a daunting task for a new business person to seek a loan approval if the proverbial ducks are not in the row.
Find out ways to get approved naturally:
You must empathize with the lending institution while submitting your loan application form. Think how much confidence you’d entrust on a stranger if he fails to provide you a true and fair view of his financial situation. Likewise, the crucial factors and circumstances relating to your finances will be checked and judged by your lender. The interview will take its natural course if you can’t show them through your real financial strength. They will try to gain a deep insight into your ability to repay funds within a stipulated period.
- Don’t delay the fund accumulation process
It’s not very easy for you to step into a nearby bank, fill out your loan application form and seek a spot approval. Approving loans for small businesses might take months for the issuer if not weeks. It’s in your best interest to initiate this process the sooner you can. You can’t afford to wait until you experience a mishap or run short of funds.
- Improve your credit history
Lenders are bound to run a credit check for determining a borrower’s risk profile. This has nothing to do with separating your finances with that of your business. You can’t force them to go in a different direction for processing your loan request. However, there are a few good means of improving your credit score. Your credit score comprises of your credit age and credit utilization apart from other factors like that of the payment history and inquiries.
Credit utilization and credit history constitute much of your credit score. You can pull up your credit score in a few months if you keep must of your credit line unutilized and pay all the utility bills on time. But for that, you’ll need to get a good grasp over your entire financial situation.
- Explain your fund utilization plan
You must inform a prospective lender about the manner in which you’re going to spend the funds. You can’t achieve the required amount by merely offering a vague description. The chances of approval may increase when you give a detailed explanation on how you’re going to use it. Your business is a separate entity, but you must be able to provide the lender with a clear statement on whether it’s necessary for meeting your administrative expenses, expansion costs, capital requirements, or the buying cost of inventory. Lenders don’t usually consider your other funding requirements like that of repaying debts with high regard.
- Seek suggestions from experts
You may have thought of borrowing $100,000 from a lender over the phone. But it’s always a better idea to track your business expenses and incomes to get an idea of how much you need for further expansion. You may set up a meeting with your board of directors, accountants, and other decision-makers before closing in on the loan amount. You might be surprised to know that you need about $104,000 for restricting your production cost and expanding the infrastructure.
All lenders wish to approve loan applications after going through the borrower’s plan. They don’t like to extend credit to someone who’s working alone. They’d empathize more with you if you develop the habit of consulting experts in your industry and know the tricks of your trade.