10 Best Tips To Get Approved For Business Loans

10 Best Tips To Get Approved For Business Loans

Knowing the 10 best tips to get approved for business loans can increase your chances of acquiring financing. It will also boost your confidence when submitting your application and meeting with lenders.

Start by understanding what your business needs. Once you’ve arrived at a conclusion, crunch your numbers to determine the amount you should borrow. You must know your personal and business credit score. It’s also vital that you have a thorough business plan with the necessary company documentation in place. And remember that lenders value credibility and honesty.

Irrespective of whether your business is large or small, chances are you’ll require a loan in the future. Albeit there’s an 89% approval rate for all SME financing, you must cover several bases to avoid the 11%. Read on for our best tips to get approved for business loans.

10 Best Tips to Get Approved for Business Loans

Getting a business loan requires you to cover a lot of ground. It doesn’t matter what the loan amount is. You’ll still need to comply with the criteria and requirements of the lender to secure the loan.

How to get approved for a business loan

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Check out the steps you can take to get a business loan!5 minutes

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Put Together Your Proposal

Make sure your business is likely to get approved for funding. Compile data about how well your business is doing.

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Collect Supporting Documents

Gather proof of your business finances like tax documents, business registration, etc.

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Apply For Business Loans

Apply for business loans through Comparewise to get matched with the best rate!

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Get Your Funding

Once you get your funding make sure to put it to good use and make the repayments on time!

By knowing what to look out for and what to avoid, you can get the funds you need for your business. Use the following tips to get approved for business loans as your checklist. Our trusted partner, SharpShooter Funding, is a great place to start when it comes to business financing options.

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1. Know What Your Business Needs

A business loan isn’t one-size-fits-all. There are several loans available to businesses of all sizes. This includes business lines of credit, working capital loans, industry-specific business loans, and more.

Therefore, the loan you settle on will largely depend on your business’s needs. Assess these needs thoroughly. A lender will want to see that you know the ins and outs of your business to justify getting a particular loan.

2. Be Realistic About How Much You Need

It’s possible to underestimate or overestimate how much your business needs to borrow. As a result, while deciding how much funding to request, be realistic.

After all, you’ll have to repay the entire loan amount. Also, you don’t want to find yourself short for cash a few months down the line.

Avoid guessing. When compared to your business, a number that’s too small or too large may appear suspicious.

Do the math to establish the total amount required. While doing your calculations, evaluate your expenses and existing debt.

Besides your debt and expenses, assess how much cash on hand you’ll need to operate throughout the year. Alternatively, factor in the cost of financing the loan’s purpose, such as buying equipment. The amount you arrive at is what you should apply for.

Although this is one of the tips to get approved for business loans that are easy to follow, remember one thing. Always support your calculations with evidence. This will benefit you when discussing your needs with lenders.

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3. Assess Your Business and Personal Credit Profile

Both your personal and business credit scores will be considered when approaching a lender for a business loan. Therefore, this is one of the tips to get approved for business loans you should keep in mind.

Your credit score gives lenders insight into how you manage your finances and honour your financial commitments. Say that your credit score indicates that you often fail to pay bills and loan repayments on time. This could have an adverse effect on your ability to qualify for a business loan.

The opposite is true if you have a long history of paying your personal and business expenses on time. This will leave lenders feeling confident that they’ll receive regular and timeous repayments from you.

Therefore, you must ensure your credit is in good standing before approaching a lender for a business loan. This way, you’ll avoid an uncomfortable situation when you speak to potential lenders.

If you’re unsure of your current credit score, you can easily obtain it from your local credit bureau. Also, be prepared for questions a lender may have about your credit profile.

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4. Prepare a Solid Business Plan with Financial Projections

Having a thorough, professional business plan is essential to making your loan application a success. And the following elements must be included to ensure you cover all the necessary information:

  • Company details: Your company’s history, management structure, strategy, and current operations will give lenders insight into your business.
  • Financial statements: This will assist lenders in understanding your business’s financial health, profitability, and ability to repay debt.
  • Financial projections: Your estimates give lenders an idea of your business’s financial outlook for the next 12 months. Forecast your cash inflows and outflows, total income, and balance sheet.
  • Loan objective details: Provides information about the project or plans for the financing and how they’ll benefit your business

Demonstrating that your project or plan is well-researched and low risk will increase your chances of getting your loan approved. Make sure you also include statistics and data from various sources to support your business plan.

5. Don’t Underestimate the Value of Your Investment and Collateral

Another great tip to get approved for business loans is to invest your own money into your business. Having invested in your own company lets lenders know you are serious about your business and that you have confidence in its success. This also shows your willingness to share the risk with them.

Some lenders may also require you to attach collateral to your loan. But should this not be a requirement, it’s still advisable to offer the lender some collateral when applying. Doing this could have a positive impact on your application.

This is because collateral assures lenders that they can still recover their investment even if the loan isn’t paid back. Ensure you have your collateral sorted before applying for a loan.

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6. Know the Lenders Requirements Before Applying

Not all lenders have the same eligibility criteria. That’s why, while shopping around, it’s essential to understand a lender’s requirements. Contact a bank or financial institution representative for information if you’re unsure about their criteria.

7. Capitalize on Existing Relationships with Banks

Considering 70% of SMEs get their funding from domestic banks, consider getting a loan from your bank. The same goes for large corporations.

Remaining loyal to a bank or financial institution can benefit you. A lender may approve your loan if you already manage your finances at their bank. Therefore, when shopping around for lenders, look at your existing, well-built relationships first.

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8. Pay Close Attention to Your Documentation

Although this may appear like one of the easiest tips to get approved for business loans, it’s the most overlooked. If you submit documentation with errors or an incomplete application, your chances of rejection increase.

Should there be any such errors, you’ll be forced to reapply from scratch. Therefore, make sure you thoroughly check what documents you need.

Create a checklist. Some standard required documents include valid identification, proof of address, proof of business ownership, and the completed loan application.

Bear in mind, though, that application requirements differ from one lender to the next. Therefore, it’s always best to check with the lender before submitting your application.

Follow your checklist when putting your application together. Doing this should ensure that you don’t omit any important information, which will increase the likelihood of obtaining the loan.

9. Demonstrate Sufficient Cash Flow

A borrower’s ability to repay a loan is a lender’s primary concern. Therefore, lenders assess your business’s cash flow to determine the chances of periodic payments.

For that reason, this is one tip to get approved for business loans that shouldn’t be taken lightly. It’s also essential to examine your cash flow statements prior to applying for a business loan.

Lenders look at expenses, past sales, and future projections. The odds of qualifying for a business loan are higher when you have more cash flow. Additionally, you may get a lower and more competitive interest rate on your loan with reasonable cash flow projections.

Also, review your bank statements. Lenders often analyze these documents since they provide concrete evidence of cash moving in and out of your business.

Prepare for questions related to cash flow that may come your way. For instance, a lender may want to know the value of unpaid invoices.

10. Be Credible and Honest

This is one of the tips to get approved for business loans that will save you from rejection. Your character is just as crucial as your reasons for needing financing.

Lenders are more comfortable providing a loan to those with a history of being trustworthy, reliable, and capable. They will consider your training, experience, and education. Also, your knowledge of your business and its environment must be top-notch to give a lender confidence.

Honesty is a card you should always keep in your back pocket. Be as transparent as possible. Inform a lender about risks you’ve identified and solutions you’ve devised.

Remember, shifty behaviour will alert a lender to an issue. This could result in your application being rejected.

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Tips To Get Approved For Business Loans Bottom Line

Every business comes to a point where they need external financing. This may be to expand or buy new equipment to increase output efficiency.

While business loans are available for organizations of any size, not everyone is approved. That’s why it’s essential to know the tips to get approved for business loans we’ve detailed in this article.

If you follow these guidelines, your business will have the funds they need. And you’ll spare yourself the disappointment of having your loan application rejected. Follow these 10 best tips to get approved for business loans and obtain the funding you need. Learn about business plan requirements & more. Thanks for reading our tips to get approved for business loans!

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FAQs about Business Loans in Canada

What is a business loan?

A business loan is an amount of money given to a business by a bank, lender, or financial institution. Just like any other loan, the lender charges the business interest, usually as a percentage of the loan amount. The business pays back the loan plus interest in regular installments but gets to use the funds in the meantime to expand their business, hire staff, or do other useful things.

What is the best business loan rate?

The best business loan rate is usually around 4%. Keep in mind that business loan interest rates vary greatly depending on your business, how much you want to borrow, and the lender.

How do I get approved for a business loan?

To get approved for a business loan you should be able to show that your business is likely to be successful. This can be shown by your previous revenue records.

How much can I borrow for a business loan?

The amount you can borrow for a business loan will depend on how much you can get approved for by the lender. Business loan lenders usually will lend businesses 10% of their annual revenue at a time.

How long can I borrow for with a business loan?

Repayment terms for business loans vary by lender and specific business loan agreement. The shortest terms are a few months, but most business loan terms last for a few years.

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February 25, 2022
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