Small business owners are quite dejected when their loan application gets rejected by a lender. They understand that they might have certain shortcomings, but the rejection is often beyond them. However, this realization and grief comes at a time when nothing can happen. If you are reading this article, before you plan to send your application for a small business loan, you still have time to avoid these mistakes most businesses make while applying for a small business loan.
No Updated Financial Records
Your financial records and statements play an important role in deciding your credit worthiness as a business. As a business you should be able to update your financial records and work on them for achieving the best results.
First off, it is necessary that you maintain a thorough double entry system and maintain a check on all the transactions you make. Not maintaining financial records is one of the most important reasons why most small businesses suffer rejection in their small business loan.
Additionally, you should look to keep your small business bank accounts and finances separate from your personal accounts, as that can wreck havoc to your chances of securing a loan.
No Explanation of Use of Funds
If you have acquired funds before, you should have an explanation of how you used those funds, along with a proper explanation of how you plan to use the funds that you acquire from the private lender you are dealing with currently.
All private lenders want to deal with businesses that are serious with how they use their funds and have authentic plans in mind. Your private lender would obviously ask you your purpose behind acquiring the loan and how you plan to use these funds. If you’re found lacking, the lender might not continue the deal with you. It is necessary that you give the required answers to the lender you are dealing with and don’t give dodgy answers. If you are planning to use the funds for buying a new software or for growing as a business, you should clear it to your lender.
No Idea of Credit Scores
Your credit score plays an important role in dictating your credit worthiness and whether a lender can trust you with their funds or not. Having a poor credit score is one thing and not knowing anything about it is another. The latter can be more detrimental than the former because of your complete negligence and lack of attention.
Forgetting Existing Debt
When getting a new small business loan for your organization, you should know everything about your existing debt and how you plan on handling that. Any shortcomings as such in how you handle your existing debt can harm your business in ways more than one.
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This post was written by firstdownseo