When the business grows, it must be able to keep up with it financially. One of the methods is getting a loan. Despite the advantages of loans, the world of small business loans is a complicated one to explore. And this is where this list of do’s and don’ts in getting small loans for small businesses comes in handy.
What To Do
Get a new business bank account — lenders always look at the financial standing of the lender before granting the business load. The best way to handle this is to have a separate account and bank books for the business.
Find out your credit scores — personal credit scores reveal so much about a business’ financial health and habits in terms of debt payment and pending credits. That’s why businesses need to check their credit scores and improve it in order to reach the minimum requirements.
Search for options — there are thousands of lenders out there. The business should do research and compare options based on prices, interest, durations, payment methods and more before committing to one.
Prepare the necessary documents — after choosing the lender, the business needs to prepare documents required to be on hand during application, which can be from tax returns to loan history, depending on the lender.
Take time to compute — a lot of business loan calculators are available online to help you have a computation of the loans the business wants to lend, especially that there are lenders who don’t reveal the true loan cost when you apply.
Get expert advice — it’s important to seek expert advice to know about the decision the business is going to take. This will also help the business learn from harmful mistakes, and avoid ones in the future.
What Not To Do
Sticking to local banks — one of the common mistakes is having the idea of banks being able to lend out money with a great interest rate and great repayment terms. The harsh reality is that not all banks are like that. It’s high time to burst that bubble and look for other options that suit your industry.
Not doing background checks — it’s recommended to search for other options, but don’t borrow from shady dealers or disreputable lenders. It’s always important to perform a background on lenders to know who’s a scam or not.
Having assets pledged to other creditors — lenders are not only looking for the numbers of your credit score, but also other issues that could make them deny your request.
Not paying on time — even though this doesn’t affect credit scores, it will lead to red flags, fewer lenders to accept loans, and tax and property lines, which will be used as a reason to deny the loan request.
Not knowing the starting date of the business — one of the first things lenders look when determining the creditworthiness of the business is asking when the business started in the first place. Not knowing when, and without proof, can make lenders deny your application.
Being vague — a big no-no in answering questions since this may give them a lack of confidence in lending you money.
