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Why is it so difficult to get a loan from a small business from a bank?

How to get a business loan is a common concern for start-up companies and those who are preparing to grow. So, how do you force the banks to say “YES”?

Getting approval for a business loan or line of credit is usually more difficult than being able to qualify for a personal loan. It is essential that small business owners are well prepared when they meet a lender to present their business in the best possible light.

“Going to a bank and applying for a commercial loan because you think you have a great idea is not enough.”

Business loans are never guaranteed until the documents are signed. Here are some tips to simplify the loan approval process for your small business.

Are you a risky client?

Are you a risky client?

One of the most important parts of any business loan application is to demonstrate to a lender that your business is able to repay regularly and ultimately repay the entire loan. If your business is profitable, you can show that your risk is low by presenting cash flow statements, a detailed business plan and, of course, a good credit history. One of the most common reasons a bank does not lend to a small business is lack of security (for example, no commercial assets), poor or no credit history, lack of experience, and / or a poor business plan.

We always recommend a 24-month minimum cash flow forecast shown month by month to show that, even with loan repayments, the company will still be able to cope with other financial obligations such as office requirements. taxes, payroll requirements and the repayment of any other existing debt.

What is your credit score?

What is your credit score?

It is highly recommended to review your credit score before applying for a commercial loan. Yes, before applying. In this way, you will know if the time is right to apply. Check that your report is complete or free of errors that may affect your score. Your credit report includes your payment history for credit cards, equipment rentals, mortgages or office loans, electricity, telephone charges and other business expenses. A simple omission – for example, your ISP, which you still pay on time, does not appear in your payment history – may result in a reduction in your credit score, so be sure to immediately correct any errors.

Ondeck offers an excellent tool for evaluating your credit rating – and its use is free. Go to their site here and see what is your result. Surprises, when looking for business loans, are never good surprises, so it is better to have information.

The biggest is not always the best

The biggest is not always the best

Nowadays, it’s not just the 4 big banks that can lend you money. So, do not be discouraged if they refuse, there are certainly other options for you.

There are many small financial institutions, savings and credit cooperatives and money lending services that are well worth an investigation. Smaller credit unions may not be able to repay a huge loan. Therefore, always understand what you are asking for and if you are asking the right service provider.

Other options such as Moula or On the Bridge – can evaluate small business loans based on your financial information in your accounting software and, generally, the process is online, which allows you to get a faster result. These are usually short-term loans, but could also be worth a look depending on your needs.

“No matter how you look for financing, you should always be able to justify the loan. Not just by passion, but in a meticulous, planned, retentive anal and digital way. “

Banks, credit unions and financial lenders always have the same general requirements. In order to lend you money, they must be assured that you are able to repay the loan. Understanding your cash position for the next 24 months is crucial, including internal and external obligations. Passion is one thing, but banks will rely on data to evaluate you – so go ahead, with all the answers, and you’re about to receive the answer you’re looking for.

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