Blunders To Avoid When Applying for a Small Business Loan
Do you want to apply for a small business loan? If yes, see to it that you will not be committing the following mistakes which can cause your application to get declined:
Not checking your personal credit report. As the owner of the business, your personal credit history is also at stake. Be sure to order a copy of your credit report from each of the three major credit bureaus and check it for possible errors or incorrect information. If you find any, request for correction immediately by sending a dispute letter to the bureau that issued your report.
Not reading the fine print. Some business owners may excitedly submit their application without reviewing the small print. Bear in mind that predatory lenders do exist in the market. The only way you can avoid such lenders is be aware of the Terms and Conditions in your contract.
Not locking the interest rate. In preparing your business loan proposal, explain your purpose for getting a loan clearly. What will you do with the funds if you do get an approval? Your loan officer will consider if you can give a valid reason for taking out a small business loan.
Not stating your purpose for getting a loan. If you know some people (such as your customers) who may be interested in business but do not want to run a company of their own, you can ask them to invest in your company or be your business partner?
Last minute plan changes prior to submitting your loan application. One of the major factors that your lender will consider is the stability of your business. With that in mind, this may not be the best time to do major changes with your company as such a move can raise doubts to a potential lender.
Getting a loan from the first available lender. Never submit a small business loan application unless you have considered all your possible options. Aside from your local bank or commercial lending companies in your area, have you tried checking loan programs offered by credit unions or by the Small Business Administration?
Not preparing your personal and business financial statements. Regardless of where you apply for a small business loan, prepare to submit your personal and business financial documents for reference.
Not preparing your collateral. Since a loan for small business involves a huge sum of money, most lenders will require the submission of collateral. The good news is that secured loans often have much lower interest rates and more flexible repayment terms so use it to your advantage.
Not preparing your business plan. Have you created an impressive business plan? Needless to say, loan companies would be interested to learn what kind of business you run and why you deserve to be given financing. Obviously, submitting a poor business plan can send a negative impression to a prospective lender and may cause your application to get denied.
Irish Taylor is a bussiness loan consultant with Startup Business Loans and has been providing consumers and business owners with startup business financing since 1992. For years she has helped people with credit and loan problems especially pertaining to business start up, SBA loans and Unsecured loans.
Copyright 2010.
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