|| For Freelancers & Entrepreneurs |
For most businesses--both big and small--securing loans can be a major growth or operational aspect. However, not all business loan applications get approved by lending institutions. This is because while banks are just too happy to release business loans (they earn a lot from loans after all), doing so for entities with very low credit rating is simply impossible. In bank rationale, lending to entities with very risky credit credentials is tantamount to signing a check with no expectations of getting repaid in the future.
This makes loan applications quite a challenge for some companies, especially those with no credit history or low credit ratings. If you are an entrepreneur and need financing to oil your operations or provide the infrastructure for growth, securing a loan is one of the fastest ways to do so. Here are some tips to significantly increase your chances of getting a loan.
1. Be prepared. Knowing the requirements of specific lending institutions well before sending your application will greatly smoothen the process. Get all the loan information you need and prepare all the relevant documentation.
2. Assess and present your cash flow projections and other financial activities in a way that will increase your chances of getting the loan.
3. Choose the lending institution/s to engage carefully. Not all institutions are prefect for your business. Some have policies that are pro-entrepreneur and knowing which lending institutions are these in your area is very important. It will also help you significantly if you have a strong and long-term relationship with the institution such as having healthy deposit accounts with a commercial bank.
4. Acquire a third-part credit rating report as much as possible. Having gained a good credit rating from other independent agencies will boost your chances of being perceived as credit-worthy by the institution you wish to acquire a loan from.
To conclude, credit and loans are good sources of business funds when managed diligently. They are also reasonably obtainable despite stricter restrictions that have been set up following the disastrous results of the lax lending regulations in the US home mortgage sector. The key is to align your cash flow, credit rating, and objectives with your loan application and to prepare all documentation in advance to obtain the loan.
