10 Simple Ways to Improve Your Chances of Getting a Small Business Loan

No matter the current economic climate, it can be a challenge to get a small business loan — whether to launch a new startup, or inject cash into a growing enterprise. However, there are ways to improve the chances of getting funding:

Your business plan is one the most crucial factors dictating success or failure. Lenders will want to see that you have a clear vision for the business, as well as a realistic view of what can be achieved within your marketplace. Pay particular attention to the executive summary, which should set out your vision in one to three pages; if lenders aren’t persuaded by this, they may not read on.

Don’t cut corners when setting out your company’s financial position. Balance sheet, accounts, cash flow information, bank statements and tax returns – all this information demonstrates that your business is financially responsible and fiscally stable, and therefore a good lending risk.

Paying off any recent credit card debt will improve your personal credit rating, which may be a factor when securing business financing. At the same time, you should be ready to provide any data on your personal finances – just as you would for your business – if required.

Whilst it’s good to build on existing relationships, there’s no hard and fast rule that says you have to use your personal bank for your business finances or your business bank for all your lending requirements. In fact, spreading your risk across a number of banks can be a good thing to do, particularly if your business hits a financial downturn.

There are many different kinds of loans available to small businesses, so it’s important to know what you require. Would secured or unsecured lending work better? Does it make sense to pay the loan back quickly or over a longer period? Are you willing to give a personal guarantee if required?

A good way of improving your chances of approval is to put some of your own money on the line. If lenders see that you’re willing to put up personal collateral, they’ll know you’re serious about your business and won’t be taking any wild risks.

Local, smaller banks often understand small businesses better and are more likely to lend to them. In addition, you will find that different local branches tend to specialise in particular business sectors. So do your research and ask appropriate questions before setting up any meetings.

If you have discussions with five lenders and four say no, you’ve still secured the financing you need. Don’t be afraid to meet with multiple lenders and see what they have to offer – you could end up with vastly better terms and a much lower interest rate by doing this.

Think about the finance you need and the purpose and period you need it for, then prepare two different payment plans. Having a clear payment road map and a backup will make you appear to be a responsible borrower and will significantly increase your chances of approval.

Alternative lenders can often help where banks can’t, through emergency loans to support your cash flow, or business growth, asset-based finance, or invoice factoring or discounting, which allows you to borrow against your invoices the moment you raise them.

Post by: Carl Faulds

Carl Faulds is a business recovery specialist. As Managing Director of Cashsolv, he offers advice and support for overcoming cash flow problems, including providing alternative finance such as business loans. In addition to providing alternative business finance solutions, Cashsolv also looks to identify possible underlying problems that can be addressed to ensure a positive future for businesses.

Company: Cashsolv
Website: www.cashsolv.co.uk
Connect with me on Twitter , LinkedIn , and Google+.

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