The things that matter when applying for a loan
October 25, 2018
Do you need quick loans to cover for some of your business expenses? This is common among business owners. Getting a loan goes beyond filling some paperwork since there are some considerations you should have in mind. The chances of qualifying for the loan depend on your credit history. You should try and gauge the likelihood of getting the loan before applying for one. Applying for a loan that has minimal chances of qualifying for only hurts your credit.
Being turned down by a lender makes it hard for you to get payday loans in the future. It makes the next bank see you as a bad risk. Before you apply for any loan, ask the financial institution about their requirements. Most of them need your credit score and ask you to show some cash flow to show the potential of paying the loan.
Have a specific amount in mind for the loan. By creating a cash flow projection, you avoid borrowing more than you need. Think about the duration that your customers take before they pay you and when your vendors need their money. Know what you need before you can approach the bank.
You should also have enough cash flow to repay your loan. Most lenders ask for financial projections for your business to assess your cash flow. In this, you should include the repayment plan for the debt. It is important to have some cash flow that is more than your loan payment requirements. You should not be in a situation where the loss of one customer can prevent you from repaying the loan.
Think about the impact of the loan on your business. A good loan can help your business grow in one way or another. For instance, borrowing a loan to pay your employees may not help you generate revenue from it, and the situation could repeat itself in the future. Instead of doing this, put the money in specific part of your business that can help you generate some revenue so that you don’t keep on borrowing in the future. You can leverage your pounds and put them into sales and marketing to help grow your business.
As you consider your personal credit score, you should also have in mind your business score. You need this credit rating different from your personal credit. Get it from Equifax, TransUnion or Experian. Aim at raising your business credit score by minimizing the balances on the credit cards you use for business. Other than checking your credit, the lender might also confirm if you pay your business contacts on time, therefore, ensure that you are not late on payments.
Your personal finances should also be in order when applying for a loan. You may be asked to submit your financial statement for them to confirm personal information like mortgage payments or even student loans. All these can determine how creditworthy your business is. Therefore, ensure that your records are sound to avoid being disqualified for the loan.