5 tips to get your business loan approved faster
Published on 2021-11-05
Category: Small Business Owners
Why small businesses might have trouble getting their loans approved
It is usually easier for small businesses to get approved for loans if they have had access to loans in the past. However, there are multiple situations in which the approvals are not guaranteed. For example, when an applicant has a bad credit history or if their business doesn't have enough collateral, lenders usually don’t prefer to take a risk.
The reasons why small businesses might have trouble getting their loans approved can vary on both personal and business levels. But one thing is for sure: it is often challenging for small business owners to secure a loan for their business. Here are some tips that you can follow to ensure that you get your business loan approved faster.
Tip #1 - Build Your Credit Score
Credit scores are used to determine whether a person or business is eligible for a loan or credit card.The higher your credit score, the more likely you are to qualify for a business loan.
A business credit score can affect the loan prospects, monthly repayments, and other important financial decisions they make in their lifetime.
Build your credit score by paying off old debt before taking on new obligations. Pay your business-related bills on time every month, use your credit cards sparingly and pay down debt quickly.
Tip #2 - Show Business financial History
Businesses that are looking to get a loan can showcase their past financial performances to avail loans from lenders. Most lenders assess the past history of loans and repayments to decide on the loan amount, interest rates and other factors before approving a loan.
A company’s financial performance is an important factor in determining whether lenders will give them a loan or not. If a company has performed well and generated healthy profits, then the likelihood of getting the loan will be higher than if they have shown poor performance.
An Australian small business is eligible for a loan if it has been operating for at least six months and has turnover with at least $5,000 monthly.
Tip #3 - Prove Income
A business owner (s) applying for a loan may be asked to provide evidence of their income and expenses. This is to verify that they will be able to repay the loan on time and with minimal risk of defaulting.
The owner can send in pay stubs, bank statements, or tax returns as proof of income. They can also submit copies of mortgage papers as proof of savings.
Calculate your Income for a Business Loan in Australia
The first step for small business is to calculate the gross annual income. Take the total amount of money you have brought in over the past year and divide it by 12. If your income is seasonal, multiply by 4.
The next step is to find out how much you spent on expenses. Start with your rent or mortgage payment (rent for commercial properties may be higher). Add in utility bills, phone bills, car expenses, insurance payments and general office costs like printing services and stationary.
This will give you a number - take this number and subtract it from your annual income to get an idea of how much profit you made on the year (this would be gross profit).
Tip #4 - What you Own
Business owners are always at risk of loss, liabilities and natural disasters like flooding, hurricanes, and fires. These natural disasters can cause significant damage to the business and its belongings. Having an inventory list is very important for business owners to know what properties and items they have and can replaced or pledged in the event of a disaster.
Tip#5 – Have a Business Plan handy
The business plan is the most important document in the world of entrepreneurship. A business plan is a formal document that provides the framework for starting or expanding a company. It typically includes information about the company's product, management team, sales projections, financial forecasts and other aspects related to its growth strategy. Many entrepreneurs feel that they can skip this step and go straight to applying for a business loan. However, this is not the case because lenders will not offer funding without a sound business plan. This gives the lender a clear roadmap about how much loan you will get and your ability to repay loans.
If your business needs a short-term cash flow boost with less risk, then getting a business loan is something you need to consider.
The most important thing to remember is that there are multiple options to choose from. You will need to do some research into the types of loans available and find a lender who meets your needs. But once you have found the right lender, they will be able to provide you with the information you need in order to receive your loan quickly. Business loan intermediaries like Capital Boost help you understand your loan requirement and match your application with the right lender to ensure a higher success rate for your application.
Tags: Small business loans, Loan approval, Apply business loan, Small business credit cards, Small business loan credit score, Microloans, alternative lenders, Finances, Business history, Expansion, New projects, Cashflow, Income, Debts, Average income per year, Business plan, Business loan application, Lenders, Revenue model, Loan EMI, Business owners, Business loan tips, Planning, Finances
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