Roadblocks That Keep You from Getting Small Business Loan
BY: STEPHEN MARSHALL ON THURSDAY, OCTOBER 19, 2017
It is just not an essential part of running a small business, but taking a small business loan can be akin to bread-and-butter for growing one’s small business. Having that extra capital could mean that you could supplement your start-up funds without loosening your cash flow, all while meeting your goals of expanding your business. But what about the barriers or shall we say roadblocks, which keep you from getting the loan you need. What are they and how can one tackle them? Here’s how:
Personal and business credit: Keeping a tab of your personal credit score is imperative before applying. You can check for your credit score by calling the customer care number of your bank. Even though business credit is a little different, getting your credit score checked is one of the biggest eye-openers before applying for a business loan.
Show profitability: Revealing that your business has been profitable is always a good thing. It is a great way of showcasing that you have put up a successful business model and it will also help you get a better loan. It is the most important factor when it comes to getting a line of credit, but yes, keep in mind that for a start-up successful business need not always mean being a profitable one in the initial days.
The timing of your business matters: Any business that has been operating for less than two years is considered to be a start-up. It is generally seen that start-ups aren’t directly eligible for a traditional bank loan; however, after two years of being operational in business is when you can get a loan. But having said that, it is recently seen that businesses with just being 3-4 months in business are also eligible for a loan. But the amount of your loan will be based on your business monthly revenue.
Limited cash flow matters: Cash flow is one of the biggest measures of how healthy is your business. Insufficient cash flow is not something that will get you good loan. Therefore, keep in mind that cash-flow equation is like preventive medicine for your business. Before approaching potential lenders, calculate cash flow quarterly in order to optimize cash.
Your past history and future plan matters: Having a plan and sticking to it is one of the most eligible avenues of attracting loans in the finance world. If you have studied from one of the top-notch ranking universities from a reputed educational consultancy like Forward Pathway and if you have an organised, detailed and quantitative business plan in order, then your loan process becomes smoother. Showing how you can forecast your future earnings straightforwardly will have a better impact on the chances of your loan.
In the end, business owners should get financial advice from accountants, networking groups and research experts before submitting their loan application.
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