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Business Loans – Strategies to Avoid Rejections

Author: Greg Samuel
by Greg Samuel
Posted: Jan 11, 2016

Every business requires an adequate amount of capital and cash flow to fund its operations. The money can come from internal operations or from outside parties such as investors and banks. Business loans from banks, financial institutions or credit unions are a great way to grow a business. These loans help to meet recurring expenses, buy capital goods and equipment or fund a business’ expansion plans. Companies or organisations opt for business loans to get the financial assistance they need when they cannot fund the business from internal resources.

A business loan is a debt that a company or a firm is obligated to repay in accordance with the loan’s terms and conditions. Any firm can apply for a business loan, irrespective of the size the business. However, some loan providers may lend only to enterprises that meet certain criteria and as such, one must have a clear understanding of these terms and requirements before applying for a loan. It becomes imperative for any business owner to understand how the loan will be given to them and what exactly the lender expects from them after they receive the funds.

A company has to ensure that it has made all the plans, collected all the required documents and done the necessary paperwork before applying for a loan. For instance, the lender may want to know how the business intends to use the borrowed funds. In such cases, it becomes paramount for business owners to have a clear and detailed plan on the uses of the funds as well as the timeline of use. This means that they need to have the board or shareholder resolutions and the business plans in place before they apply for the loan.

Let’s look at some of the points that a business owner such as yourself has to keep in mind to get the approval for a business loan:

  • Do the Financial Research and Undertake the Background Check: Provide detailed and well-researched financial details to show how the funds will help the business grow. Both the business plan and the numbers must be viable and based on facts. Include details of the financial background of your company and its future plans. This will improve the chances of your business loan being approved.
  • Define Needs: Make sure that you have a definite amount of capital in mind so it’s easy for you to elaborate the uses and also make the repayments on time. Asking for a definite amount also means that the lenders will realise that you are well in control of your business and that you will make good use of the funds.
  • Ensure Business Viability: Ensure that your business is truly viable and profitable so that the loan can be repaid easily. Bankers are well aware of the business environment and it does not make sense to ask for a loan if the economy or the business is not viable. For instance, asking for a loan to construct more housing may not sit well with a banker if the residential real estate market is already in a glut. It may make better sense to plan a resort or a hotel in an upcoming business district.
  • Transparency: Be clear and precise as to how you intend to use the loan to achieve your financial goals. Share this information with the lending institution. Let them know about your financial planning processes and software (if you have them) and promise to keep them appraised of the latest situations. Also, ensure that you deliver on your promises when you get the loan.
  • Good Financial Health: Make sure that your business earnings and cash flow are robust. It is critical to have stable financial statements and consistent earnings. Most banks ask for the BS, P&L and CF statements of the previous years. All these records must be in perfect order.
  • The Amount of Collateral: This should be sufficient in terms of real estate, equipment, inventory, etc. which makes the loan deal attractive for the banker.
  • Volunteer Personal Details: It is a good sign if you can supply references from your bankers that show your financial details besides your credit history. The lending institutions may not need these details but it never hurts to volunteer your strong financial records.
  • Tax Expenditures: Do not try to represent a picture where you show that you are overspending on your business in an effort to minimise expenditures on taxes. The expenditure of any business must be realistic.
  • Local Lending Options: Try to look for local community lenders who will understand the local economic scenario better and will have insights into how local business environment functions. They are also more amenable to provide local businesses with loans as thriving local businesses means more clients for them in the long run.

Keep Your Options Open: There are quite a few business loan options available in the market. Look for alternative financing if you are not getting a traditional business loan, due to issues such as irregular cash flow.

About The Author:

Samuel Finance is a leading organisation for commercial finance and mortgage broking. They have a personalised approach to help you achieve a superior outcome for your personal or business finances. They provide finance for business loans, trading, working capital, property investment, development, home loans and more. They always strive hard to be a trusted advisor and deliver an outstanding level of personalised customer service.

About the Author

Samuel Finance is a top-notch commercial finance and mortgage broking organisation in Adelaide, SA. They help you in sourcing the best possible finance, for both commercial and personal purposes.

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Author: Greg Samuel

Greg Samuel

Member since: Oct 14, 2015
Published articles: 25

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