Obtaining small business loans may seem easy enough but nearly half of all loan applicants get turned down by banks. If you want to have a better chance at getting the funding you need, you should be adequately prepared.
Applying for a Business Loan
If it’s your first time to get a loan, among the first things that bank pay attention to are:
- How you present your business idea to them
- The viability of your business plan
- Your financial projections
When you can prove to your lender or investor that your business is very feasible and has the potential to achieve a steady – and high – ROI, then it should not be difficult to get an approval from your bank.
How to Boost Your Chances of Getting a Small Business Loan
Here are some tips that will help you increase your chances of getting approved for a business loan:
- Create a realistic budget.
Banks and investors are only interested in whether or not your business idea will be profitable. They don’t have to buy your idea, they just need to be convinced that it has a lot of potential. So if the financial projections you will show them look like it’s too good to be true (i.e. you’ll make millions of dollars in profits right away) then chances are, they won’t believe it.
- Make sure you have budget references.
Preparation is vital to any loan application and increasingly so with business loans. It could determine whether you will be granted a loan or not. Your budget estimates should be backed by real research and actual data. The more references you can show them, the more credible your numbers will be.
- Don’t underestimate your expenses.
Unexpected expenses can really affect your cash flow and presenting a conservative projection of your business expenditure to your bank is not always a good idea. Experts recommend that you increase your expenses by at least 25% so you can have a more accurate projection.
- Make sure you have extra funds.
If you’re a small business owner, it’s imperative that you have saved up enough in the bank to pay for your operating expenses in the first year. Chances are you won’t make a lot of money when you start out and you’d still be paying for your loan.
- Don’t worry too much about your finances.
While it’s true that your finances can affect your business significantly, you should focus your energy on marketing your business. You, as the business owner, should believe in yourself and your new venture. Otherwise, you won’t get anywhere.
- Learn from your own mistakes.
Everybody makes mistakes. Don’t think that just because you did something wrong, you won’t be able to succeed. The key is to learn from your mistakes and strive to become better with each challenge you face.
