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It’s time to take your business off the ground! Whether you’re planning to start your own firm, or increase working capital of an established small organization, you may need to secure small business loan (SBA), and that doesn’t have to be a nightmare.
When it comes to application process, it is important to have all your ducks in a row. Lender or banks want to know that you are a good credit risk and all you need to prove this is to present a strongly written business plan, yourself and your financial needs.
However, a borrower must complete the loan application thoroughly and avoid the mistakes that can cost him/her funding requests. These are three most common mistakes avoiding which can help you improve your chances of securing the loan painlessly and quickly.
Mistake #1 Incomplete loan application
This goes without saying that the loan application must meet all the minimum requirements as set by the bank or financial institution in question. Be sure to include everything that’s been asked in the application form. Most banks put great emphasis on tax returns, credit score, bank account records and P&L statements. Transparency in all major financial aspects of your business is an absolute must!
Lenders want to make sure they know all gory details of your business that will also help them help you avoid taking sloppy risks. Submitting an incomplete application with lack of attention to detail can cause concern and might minimize your chances of securing the loan.
Ten Seconds Takeaway: To start with, ensure that you clearly mention the amount you need and what you intend to use the money for. Be short and precise for faster business loan approval.
Mistake #2 Taking credit score too casually
In simple terms, do you pay your bills on time? Are you sure? Grab a free copy of your credit score from one of the major credit bureaus. Equifax, Experian, and TransUnion are a few to try out before you apply for a loan. Are you eligible? Let’s read ahead then!
Putting your documents in order won’t help you if you don’t have good credit. Whether a bank or a private finance institution, all lenders will conduct a thorough background due diligence by verifying the past accounts of you and your business. It is therefore, better to present such information along with the loan application.
Ten Seconds Takeaway: Apply for one loan at a time.
Mistake #3 Lack of business plan
If you still haven’t invested your time into writing a good business plan, perhaps, you should put your application on hold.
A good banker will always want to know the backstory of your business. What does the business do? What industry you’re targeting? How did you come up with this idea? How driven are you to take this business further? What products or services you are offering? How would you get paid in the organization and when? Most importantly, what is your business model, revenue model and how do you make profits? Apparently, only a well crafted business plan can answer these questions for you.
The business plan also helps figure out the amount of money you would need to borrow to take your business off the ground.
Ten Seconds Takeaway: Most bankers read the Executive Summary, a one-page document that summarizes the goals, targets, teams and financial projections of the business.
Business owners who do not know how to write a business plan can try Business Writing Software or Tools that offer a huge library of business plan templatesthat can be used to write a compelling and precise business plan.
Do you have any bank-loan experience story and tips to share? Feel free to write them down in the comments section below.