It’s a fact – small businesses can have a tough time getting funding. So before coming up to lenders, be sure you have asked yourself: how do I boost my chances of being approved?
Meanwhile, these tips should help:
Prove that your business can maintain steady cash flow.
Cash remains king and a major indicator of the current and projected health of a business. By showing financiers that you have adequate money entering and exiting your coffers, you are telling them that you can pay your staff, employees, creditors, and the others on time. In short, prepare all those financial documents, such as bank statements and tax returns. Anticipate queries about any inconsistencies in your cash flow and supply an explanation before they could ask.
Maintain a reasonable debt load.
Debt load refers to the amount of debt you have that can be found on your balance sheet. Be sure to show that you cannot only pay for your current debts, but also for the additional debt your proposed financing will bring in. If your loan is meant for expansion, explain how this inflowing debt is going to benefit the business.
Sustain an encouraging payment history.
Among the most crucial factors for any financier to consider is the business’ payment history. You should be able to show that you have the habit of paying down your debt and on time. If the lender has requested a credit report on your business from a third party, ask to review it so you can verify if it’s accurate. That report may not show your big trade partners and other financiers who could provide an impressive reference, and confirm that you are a consistent and responsible borrower. Give them the references yourself, and make sure you have actual names of people and not bank names, your suppliers’ brand names, etc.
Demonstrate sensible business judgment.
You need to assure potential financiers that you anticipate challenges and that you have concrete plans for addressing them. In addition, they need to understand that you have management in place to deal with every obstacle that may be on your path. All of these must be part of your business plan, which is obviously and absolutely needed for a solid loan application. It should also contain a forecast for your business under two scenarios (at least): how your business will perform if you get the financing, and if you don’t.
Don’t assume you will always get the best terms from your bank or the vendor. Spend time checking out a number of companies and the financing options they offer. Know all the relevant details – terms, fees, interest rates, and so on. Now compare and choose the best.