How to Apply for Business Loan and Get Approved

How to Apply for Business Loan and Get Approved

Some time as a borrower, you apply for a business loan and get rejected. You may not understand the reason for rejection but this can be ample.

You need to understand that being rejected from accessing your business loan does not mean that you need to be dejected forever. The fact is, you must be prepared well before applying any type of loan for your business.

Here are some questions that you need to ask yourself before you apply for a business loan.

1. Is my business worth to be financed by loan?

Your business wealth to qualify for a loan is closely related to credit score of your business.

Normally, 800 is considered as best ideal for business credit score; also if the credit score of your business is anywhere between 680 and 720, there are high chances that your score will still be accepted.

If your business credit score is below than the required limit or margin of 680, be prepared to face a lot of rejections.

 

Unfortunately no one want rejection, if, they find that you’re most likely to increase your business credit score after financing with a loan, you’ll have to answer a range of questions from them, such questions are: “ what steps does your business take to prevent re-occurrence of the same situation?”.

Another important thing that you need consider while applying for your business loan is that you need to carefully analyze your business cash flow to debt ratio.

The required ratio is 1:1 which will be automatically accepted by lenders. You can consult an expert to be familiar with ratio calculation process.

2. Who will be listed on loan application statement?

Many lenders would prefer anyone having an ownership in business of 20% or more to be listed within loan application agreement.

The best thing to do in order to make sure that your business loan application process is not rejected is to pick that person with best credit.

3. What is the value of my credit score and how can I improve it?

Business owners should clearly understand that their business and personal credit scores are two distinct things, so they should not mix them.

Sole proprietors who own just small businesses, their private credit score can be considered.

At times, their personal credit score may not be considered due to situation of their businesses when their operations are for a long term.

They require that their businesses operational life should be long enough so that they can generate their robust credit score. Every lender will look at your business’s credit score therefore it’s very important to get inspired by it.

4. What next if I don’t get loan from a certain lender?

You should avoid frustration if your loan application request to a certain lender got rejected.

Instead try to apply for the same loan but from a different lender anyway, there are many sources of business loans. Try other lenders such as state and local economic development agencies and other not-for-profit organizations.

They provide low interest loans to mostly sole proprietors who may not qualify for loans from banks and other agencies funded by Central bank.

5. What do you need for your business loan?

To increase your business loan approval rate, you should know that for your request to be approved, you’ll require quality and good answers to questions that the lenders may ask you.

Such as why are you applying for loan? How do you plan to use the loan in the long run? What other type of business debt do you have?

Loan applicants should understand that their answers to above questions will greatly determine whether they will qualify for a business loan.

Lenders are much interested to know why and how their money will be utilized to access whether the business will be in a position to pay back based on agreed terms.

 

When it comes to applying for a business loan, the good news is that most lenders’ questions will require the same answers.

With business loan, your business can prosper to gain a robust credit score and increase her cash flow without much hassle. The best repayment schedule will be determined by those with higher credit score in the business.

Any expenditure of your business loan should be taken into an account to prevent misuse of fund.

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