It’s a fact – small businesses can have a tough time getting funding. So before coming up to lenders, be sure you have asked yourself: how do I boost my chances of being approved?
Meanwhile, here are a few helpful tips:
Establish that your business has a steady cash flow.
Cash remains king and a major indicator of the current and projected health of a business. If you can show that you have enough money coming in and out of your coffers, you can convince potential financiers that you can pay your creditors, staff and the rest on time. In other words, be ready with your tax returns, bank statements and other financial documents. Anticipate questions regarding any fluctuations in your cash flow and give an explanation without being asked.
Keep a reasonable debt load.
Debt load refers to the amount of debt you have that can be found on your balance sheet. You have to demonstrate that you can repay not just your current debts, but also the debt that comes in with your proposed financing. If you plan to use the loan to expand an existing business, explain the benefits offered by the incoming debt.
Have an impressive payment history.
Financiers consider several factors when reviewing a loan application, and one of the most crucial is payment history. Your history should show that you have a record of paying down your debt and on time at that. If a third party has provided the lender a credit report on your business, ask if you could take a look to make sure it’s accurate. That report may not mention your major trade partners and other financiers who would be happy to give a positive reference, and confirm that you are a good payer. Supply them with references yourself, and remember, these should be names of actual people you’ve worked with, instead of names of banks, your trade suppliers, etc.
Show sound business judgment.
Potential lenders need assurance that you anticipate challenges, and that you have already planned for them. Moreover, they would like to see that you have management in place to overcome whatever obstacles come your way. All of these should go into your business plan, and yes, it is absolutely crucial that you have one. As well, It should include a forecast for your business for at least two possibilities: what happens when you get the financing, and when you don’t.
Never assume your bank or the vendor will prepare the most favorable terms for you. Spend a while exploring different companies and financing options available to you. Find out all the details, such as interest rates, fees, terms of payment, and the others. Then compare and pick the best.