The approval rates of small business loans seem to keep dropping, which is bad news for businesses in need of financial assistance.
Are you one of the many businesses that need a loan, but you’re not sure you’ll meet the requirements?
If you need to apply for a business loan, you can improve your chances of approval by knowing which mistakes to avoid. Keep your business afloat by following our tips and errors to avoid when it comes to business loan applications.
1. Failing to Update Financial Records
How accurate are your financial records? If you’re not keeping detailed records of your financial information, lenders will pass you up. Remember, lenders need to know that you have a stable business capable of repaying your loan.
Don’t fudge your numbers either, as banks can easily look up and verify this information.
Not sure what documents you need? If you’re applying for a loan guaranteed by the SBA, use this loan application checklist.
2. Applying for the Wrong Type of Loan
There are different types of loans you can apply for, and you need to know which ones benefit your business the most. Your needs must meet your application request.
If you’re not sure what type of loan you need, research your options and consider your purpose for the funds. Search the best loans for your situation, such as long-term vs. short-term loans.
For instance, do you need money fast? Online loans can help you get money when you need it most.
3. Not Understanding Requirements
Before you apply for a business loan, you must double-check the lender qualification requirements. Failing to meet these minimum requirements will result in a denial or a credit check.
Most lenders will have this information somewhere on their website, so it shouldn’t be hard to find.
4. Forgetting Personal Credit History
When applying for a small business loan, you should know that checking your credit history is a crucial step to success.
Does the loan you’re applying for require a high credit score? If you’re a new business, it’s likely lenders will run a credit check on both your business and your personal credit.
A bad personal credit history can negatively impact your chances of approval.
5. Waiting Too Long to Apply
One big mistake businesses make is waiting too long to apply for a loan. When your business is in dire straits, it’s often too late for a loan to help.
If your business isn’t doing well financially, this can impact your chances of approval. Lenders might be nervous about lending you the money since you may not be able to repay your loans.
Business Loan Applications Made Easy
Filling out business loan applications doesn’t have to be nerve-wracking, as long as you avoid these common mistakes. Follow our tips above to keep your business afloat and improve your chances of getting approved for a loan.
For more business advice and tips on financial success, check out our other articles on finance and business today.
