Many Banks today are being pleased as the great banks that maintained the most works with its SBA borrowing. Meanwhile, some private lenders are still receiving greater compliments as the small bank that granted the most loans. This was also documented for granting the second to highest number of loans to undeserved markets.
Obviously, getting a loan from bank is not a child’s play these days for small businesses. So, I plead to those private lending firms which make it a point of business to borrow money to the small business and educate them on how a business startup can increase their chances of getting a loan.
So, here is to mention some but few of the top mistakes a business owner makes when applying for a loan and the way of avoiding them.
1. Miscalculating the values of personal credit.
Loan providers take a clear look at your personal credit records like (personal bills, credit cards and mortgage payments) to get a sense of your track record with financial responsibilities. If a business owner does not show carefulness in managing their personal credit, there is likely a chance that they will take the same approach to their business credit.
2. Applying for the wrong type of loan.
One of the most prominent consequences of a small business owner is using credit projected for a short period of time and buys a product that will last long. In this situation, they will use the wrong type of credit product for wrong purpose of the loan.
3. Expecting a loan without collateral or no plan to pay it back.
No bank that do exist in this state, nation or world wild if I may say will be able to approve a loan without seen a collateral or having a strong belief that the loan will be pay back. So be sure to explain in details your business plan, how you are going to get the money to pay back the loan or sizable collateral to back it up. Also state why the loan is crucially for your business. Make sure there is a strong business plan as to what they are planning to do with their business and how the financing will support the mission for the bank.
4. Wasting a lot of time before approaching a banker.
Getting a small business loan is all about having a relationship with the bankers. There is a far much chance for a banker to borrow you money when you want it and they already know who you are and what your business is all about. It’s better to relate with the bankers face-to-face and telling them the kind of business you are into before you need the loan, in the sense you will also create chance to get your business financials organized and in good shape to look better and make a good sense in their mind.