Five Common Business Mistakes When Applying For A Loan
Looking for funding can the most difficult task for a new small business as it takes up so much time along with being quite stressful. That doesn't mean you should completely abandon it completely. With a little bit of planning and preparation along with avoid commonly made mistakes, you will undoubtedly see success.
Business in all areas take the process of finding money too lightly in my opinion. It is this lack of attention that leads to mistakes that can jeopardize the loan process and in turn your business. Here are five other common missteps business owners make when applying for a business loan:
Applying to the most convenient lender only - There are hundreds, if not thousand, of lenders you can go through. The problem is most business owners just go their local bank without seeing what else is out there. There is nothing wrong with shopping around a little. Take a look at using credit unions or many of the other sources out there for the best deal. Another choice is to consider what the Small Business Administration can do through one of their own loan programs.
Poorly kept financial records - This one is a pet peeve of mine. How successful of a business do you plan on having if you can't keep accurate, up to date financial records? If you are thinking about applying for a business loan, don't even bother without having the proper financial documentation. I see many people try to get a loan without making sure their financials are up-to-date only to be denied.
Not having any equity in the project - This works in the similar manner as making a down payment on a house as equity. By putting some equity into a business project you are showing your commitment to it and improving your chances of getting approved. Why should the lender ok the business loan, if you aren't willing to invest some of your own money into it? It looks like a risk they are unwilling to take.
No developed business plan - A lender will want to see how your business will operate and make money before it will approve you for a loan, especially one just starting out. This done through a well put together business plan. In it a lender can see all of your goals and how you intend to reach them with specific details. Don't forget to include any other applicable supporting data.
Unaware of your credit rating - You should have an idea where you stand credit score wise before you think about applying for a loan. Obtain a copy of your credit scores from the three major credit bureaus. By looking at these you can get a idea if you will be approved for a business loan or not.
