It might not be as complicated to apply for a business loan as it once was, but loans can still be rejected if you’re not careful.
Any prospective borrower needs to stay away from the mistakes that can lead to this rejection or delay. Here, we’ll be taking a deep look into the potential mistakes to be aware of when applying for a business loan.
No solid business plan
Those who fail to prepare should prepare to fail. Having a concrete plan in place lets the lender know you’re serious about the business and building it into a success. With little more than a flimsy plan behind you, the lender is unlikely to have much confidence in your ability to deliver.
The plan should include revenue and profit projections for at least the next five years and a list of the business strategies you plan to follow. Remember, they are only investing in you if they think you can turn over a profit and a business plan is how you visualise that process.
While you might assume this is less important in a world of paperless bills and digital transformation, when applying for a loan, lenders will still want to see documents such as proof of address, proof of income and more before they approve your loan. If you don’t always have these documents available, the lender might feel that you’re not fully compliant or are trying to hide something and lenders today value transparency over all else.
Not giving accurate financial information
If a lender discovers that they have been provided with manipulated financial numbers, it will lead to outright rejection. Be honest with your numbers, even if you’ve made losses in recent months as they will find out eventually.
If you’ve been experiencing losses and know why, go through it with the lender and tell them how you plan to make improvements going forward. If you provide false information, they will always reject you eventually and are unlikely to consider lending to you in the future either. Also, if there is even a trace of bankruptcy or loan defaulting in your past, the lender will find out. So, if you think something in your past might pop up as a red flag, be forward about it.
Finally, perhaps the most important thing to avoid is neglecting to do your research before even applying for a loan. Compare lenders based on interest rates, processing fees, customer service and more, taking your time to find the one that offers the right balance for you. Because once you sign on the dotted line, there’s no going back and there are more lenders than ever before to choose from.