You will always find a use for a little extra money in business.
Whether you are trying to get your initial idea off the ground, expand into new territory, employ more staff, buy heavy equipment or even pay off an old debt; your company can always find the need for a bit more money.
A common source of finance in business is applying for a loan. However, these loans aren’t handed out to anyone.
There are several criteria that you need to meet before qualifying for a business loan. As such, let’s look at a few ways to improve your chances of success.
Present Your Finances
The decision to loan someone money is never one that a company will take lightly.
They will take into account several factors, the most important of which is your ability to give them their money back over some time.
It isn’t a simple case of just paying back the money when you have earned it, either. Any money that you borrow will come with interest payments, which are additional fees for the loan.
To make sure that you qualify for a business loan, you need to layout proof of all of your financial information.
This should include your profit margin, how much you expect to grow, and all of your expenses. If you can demonstrate a model of success you are far more likely to be granted a loan.
Get your facts in order and you will present a much better picture.
Pay Off Your Debts
On the topic of proving your ability to pay back a loan, it is always a good idea to go into these meetings without any debt.
Existing loan payments may give you the appearance of an unreliable investment, which could hamper your chances of getting a loan.
It doesn’t matter how big your debt is, you will find lots of helpful advice out there that can increase your chances of paying off your debt.
For example, Tally’s tool on their website provides a loan payoff calculator that can better organize your debt payments and speed up the process.
A bank will not immediately dismiss your loan application because of your debt, but it can make you appear like a risky prospect.
Try to wipe your debt off as best you can, or take the right steps to prove that you can reliably keep up with outstanding payments.
Check Your Own Credit Score
The next thing that a lender will look to when deciding to give you a loan is your credit score.
This score is a number between three-hundred and eight-hundred and fifty that details your credit history.
It will rise when you regularly meet payment deadlines and fall when you make payment errors or go into debt.
A low credit score will reduce your chance of qualifying for a loan.
You don’t have to have the highest score to qualify for a loan. In fact, there are plenty of people out there with a perfectly average credit score because they simply haven’t engaged in an activity that can raise or lower it.
A higher credit score does help, though, so try to look into ways that you can improve your score if you are having trouble qualifying for a loan.
The Right Collateral
Applying for a loan isn’t as easy as signing on the dotted line and promising to pay the money back.
The lender will need insurance, something worthwhile in case you fail to pay them in time.
This insurance is often referred to as collateral, and it is something that is taken by the bank if you void the loan agreement.
Types of collateral include your real estate, investment holdings, or any inventory you may have.
The amount taken is usually in line with how much you owe, so be careful when agreeing upon collateral.
Keep An Eye On The Current Market
Sometimes you can do all the right things in life and still fail. This is because there are external factors out of your control that affect your success, and the same is true in finance.
The economic state of a country has a huge impact on how the bank behaves, including its willingness to loan money.
For example, a country about to head into recession is less likely to qualify people for a loan because there is less money to go around.
The economic climate can make applying for a loan a lot easier or harder for you depending on the circumstances.
As a business leader, you may want to investigate these economic conditions before you design your case.
You may have to work harder at removing your debt or wait until things straighten out before being granted a loan, so make sure you apply at the right time to increase your chance of approval.
Conclusion
Money is supposed to make the world go around, so try to prepare yourself correctly if your business needs some help with a loan.
It is always important to remember that lenders want to lend but only to the right people.
Use the advice in this article to brush up on your act and you should have a problem getting the financial assistance you require.