The Secrets of Getting your Small Business Funding Approved
It’s not a secret that starting a small business can be quite a challenge especially getting financed. It’s advisable before you approach any lender, ensure that you ask yourself: how can i increase my chances of securing the loan. Here are five amazing tips you can adopt to maximize your chances of having your loan request approved.
Clearly show that your business will generate a steady cash flow
Money is the main factor when it comes to business because it determines the prospects and health of the business. By clearly demonstrating you will have a steady cash flow to your potential lender in that you will be able to pay employees, creditors and other cost associated with running the business, you will be increasing your chances of securing the loan. Demonstrate this by providing tax returns, financial statements, and bank statements. These important documents provide your lender with a historical perspective of the liquidity and performance of the business. Expect questions about cash flow and fluctuations. If cash flow dipped because of a loss of a customer or recession, be in a position to provide an explanation.
Maintain a debt loan that is manageable
The debt carried on your balance sheet is referred to as debt load. Not only should you be able to show that you are in a position to handle your current debt loan, but also the debt loan your potential lender will cause. If you want to get, for example, an inventory loan for growing your business be ready to show why the additional loan will be beneficial. For instance, demonstrate how the additional liquidity will be spent, and project the added income that will be derived as an effect of the infusion of money.
Sustain a positive payment history
One of the most crucial aspects for any financial lender is to go through the payment history of the business. A lender requires seeing the business has kept records for paying all debts. Sometimes the lender will have to look at a third-party credit report. However, the report does not show your business partners and other financiers who can act as a good reference, and proof your perfect payment history. Therefore provide all these references and the contact information of the person you deal with at your financial institution.
Provide business judgment
Potential financiers want you to prove to them that you expect potential future problems and that you have developed a plan on how you are going to overcome and address these problems. Also, potential lenders are more interested that your management will be able to handle these potential challenges. Therefore, provide a business plan to show your potential lender. Demonstrate how your business will survive if your credit is not approved and also the business will perform if the loan request is approved.
Shop around for lenders
Don’t assume that your local bank will offer the best terms. Compare lease terms, fees and rates and all the available options and approach a financial provider that is well established.