It’s a fact – small businesses can have a tough time getting funding. So prior to meeting with lenders, think how you can increase the possibility of getting your application approved.
Meanwhile, here are a few helpful tips:
Prove that your business can maintain steady cash flow.
Cash remains king and a major indicator of the current and projected health of a business. By showing financiers that you have adequate money entering and exiting your coffers, you are telling them that you can pay your staff, employees, creditors, and the others on time. In simple terms, be ready with your financial documentation (bank statements, tax returns, etc.). Anticipate queries about any inconsistencies in your cash flow and supply an explanation before they could ask.
Maintain a reasonable debt load.
Debt load is how much debt you have that is shown on your balance sheet. You should to be able to prove that you can handle not just what you currently owe, but also what you will owe the financier in case your application is approved. If you plan to use the loan to expand an existing business, explain the benefits offered by the incoming debt.
Keep your payment history positive.
Financiers consider several factors when reviewing a loan application, and one of the most crucial is payment history. Your history should reflect a consistent pattern of you paying your debts on time. If the financier has obtained a third party credit report on your business, ask to see it so you can check its accuracy. 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. Provide references yourself, and be sure these are names of people and not names of banks, companies, 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.
Comparison-shop for financing.
Don’t think your bank or the vendor will always offer the best terms. Spend a while exploring different companies and financing options available to you. Know all the relevant details – terms, fees, interest rates, and so on. Now compare and choose the best.