When it comes time to put in applications for a loan, you want to give yourself the best possible chance of success. Whether you're keen to seek a fast capital loan from an alternative lender or want to chat to your local bank, there are ways to make your application more likely to be approved. One of the key tips to getting ahead is to learn from other people's mistakes.
Read on for some of the most common errors that business owners make when trying to secure funding.
Mistake #1: Ignoring Financials
A regular mistake that entrepreneurs make when seeking a loan is not spending time on the company's financials. Banks and other lending organizations need to see up-to-date and comprehensive accounting data in order to determine if a business is secure enough to loan money to. Financial records give lenders a snapshot of the current standing of a business, and are a must for any loan application.
Before you attempt to seek funds, make sure that you possess documents such as profit and loss projections, cash flow statements, balance sheets, income statements and recent tax returns. (You may also need to provide information on your own, personal financial status too). All of this data will help potential lenders to see if the business can actually afford a loan, and if so, to what value.
Mistake #2: Lack of Clarity on Use of Funds
Another area where owners tend to fall down when applying for a loan is not having a clear idea about how they would use funds from a lending institution. Before you even start to seek out a cash injection, make sure you spend time analyzing if your company really does need additional money, and if so, what exactly the funds would be spent on.
Lending organizations want to see that an entrepreneur plans to spend money on the "right things" -- that is, on financing purchases or operations that will impact the business in a positive way and help the company to grow. Show lenders that your reasoning is sound by explaining what additional funds will be used for, and the beneficial reasons behind the spending.
Be aware that lending organizations typically see merit in some of the following plans:
To pay for product or software developments that will bring in additional sales long term
To purchase quality real estate or finance a needed piece of equipment
To cover seasonal sale variances
On the other hand, less favorable ways to spend loan funds https://www.swiftcapital.com/
