Small Business Loan Mistakes To Avoid
Do you plan to obtain a loan for your small business? If yes, steer clear of these common mistakes to ensure the approval of your business loan application:
Not checking your personal credit report. As the owner of the business, your personal credit standing will be reviewed. Hence, it is recommended that you check your credit report from all the three major credit bureaus before submitting your application. This way, you can make sure that there are no errors or unauthorized charges in your credit file that may cause rejection.
Not reading the fine print. Others make the mistake of signing up their loan contract without understanding the stipulations. Although you may be offered a good deal, the only way you can be certain that found the right loan is by examining the fine print. Remember, this crucial step is a must to avoid problems later on.
Not locking the interest rate. Because the rates can change at any time within your loan’s term, it is advisable to ask your lender for a lock rate to protect yourself from ballooning charges.
Not stating your purpose for getting a loan. In preparing your business loan proposal, clearly define your purpose for taking out a loan. How much do you need and how do you plan to spend?
Last minute plan changes prior to submitting your loan application. You need to convince a prospective lender that your business can withstand the tough competition in the market. This is not the time to make major changes in the structure of your company as doing so may be seen as a sign of instability and may cause your rejection.
Getting a loan from the first available lender. Check from your local bank or nearest lending company for the types of business loan packages they provide. Still, it is also a good idea to consider all your possible options instead of just concentrating on the lenders that are most accessible to you. For example, have you checked the different loan programs offered by credit unions or by the Small Business Administration? You may be qualified to apply for a low interest loan from these sources.
Not preparing your personal and business financial statements. Personal and business financial documents are usually required when applying for a business loan so be prepared to present these paperwork.
Not preparing your collateral. Since a business loan involves a significant amount of money, banks and commercial lenders will often demand for collateral. Using collateral or a guarantee will also enable to get better loan rates and more flexible repayment terms so it’s a good idea to consider.
Not preparing your business plan. An impressive business plan is essential if you want to get an approval. As can be expected, lenders would want to know what type of business you run and why you deserve to be granted financing. Yes, your business plan can be the deciding factor in getting an approval.
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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