Due to the risk involved in business finance, strict guidelines are imposed, so securing a loan approval can be challenging. Here are a few mistakes to avoid to increase your chances of approval.
Not knowing your credit score
Many consumers may not realise the significance of a credit score. Not only is it taken as a measure of your ability to make repayments, it also records your financial history which is why understanding what it is and how it can be improved is vital.
Lack of planning
Understanding the criteria banks use to assess the application and having a well-prepared application greatly increase your chances of approval. The key things to understand when it comes to your application are a healthy debt to income ratio, existing business assets and a justified cash flow position as this ensures that the lender has a complete understanding of what has happened and how the business will look in the future.
Aside from providing these forecasts and statements, be prepared to discuss the purpose of the loan and how the business will service the loan.
Lenders want to see longevity in a business and, in order to showcase that, a demonstrably good strategy supported by financial statements must be in place, and those statements should be geared towards demonstrating strong earnings. Unfortunately many businesses are focused on being tax efficient and instead of maximising earnings. While there are tax benefits to tax effectiveness, not managing your business in order to show maximised earnings can have a undesirable impact when it comes to applying for a loan.
Not having the right advice Surrounding yourself with commercial experts can provide you with a grounded understanding of what needs to be included in your application, and a good commercial and equipment broker can match you with the right loan product. Good commercial brokers understands that running a business can often leave you time poor, so ensuring you have a trustworthy and qualified guide to do the legwork can be the difference between an approval or a decline.
Want the right advice to help in getting your loan approved? Call Chris today on 0490 075 039 or send an email to firstname.lastname@example.org