Increase Your Chance of Getting a Bank Loan with These Tips April 5, 2016My BusinessOff

Taking out a loan can be an excellent way to grow your business. Many small business owners need a loan to get started or to help them expand later on. A business loan can also help you out when you’re stuck. If you’re having cash flow issues, calling your bank for a loan could help to tide you over. However, taking out a loan is no walk in the park. Banks don’t want to take huge risks on businesses with no proven track record. You have to be able to show them that you’re reliable, and you can pay the money back on time. Even when you have a good reputation, it can be difficult to get a loan. Many businesses are turning to other methods to raise funds. If you’re sure a bank loan is the way to go, use this guide to increase your chances.

Improve Your Credit Score
When you take out any kind of credit in your person life, you need to show that you have a good credit score. It proves that you have an excellent track record of being responsible with your debts. It’s the same when you want to take out a business loan, so you need to ensure that your score is a healthy number. If you check your credit report, and it looks worse than you expected, don’t panic. It’s possible that there is an error on your report, so read it carefully. If you spot an issue, you can hire a service to challenge it for you. Sky Blue Credit Repair and similar companies will dispute unexpected items for you. These services can even go over your whole credit report and come up with a plan to make it healthier.

Create a Business Plan
You need to show your bank that you know what you’re talking about before they can let you have a loan. There is a debate about whether you need to have a business plan when you set up your company. However, when it’s time to take out a loan, it’s essential that you have one. So what’s the point of creating a business plan? You can use when you request a loan to show where your business is going and what your finances will look like in the future. You can use your plan to demonstrate that you’ll have no problem paying back the loan on time. You should also use it to show the benefit the loan will have for your business. Perhaps it will increase earnings, for example. Your banker would rather see that the credit will increase profits than that it will help you out of a tight spot.

Present Yourself Well
Your personal reputation matters when you ask your bank for a loan. The bank choosing whether to lend you money is all about trust. You need to be able to talk about your business and show the numbers, but you matter too. Your banker needs to be able to relate to you. However, it’s not just about being a nice or confident person. You also need to have a good track record with the bank. If you ask for a loan somewhere you don’t have a history, it will be harder to get approval. You should take the time to get to know your banker and get in their good books. Some even take their banker out for lunch so they can discuss their business in a less formal setting.

Choose the Right Time
Sometimes asking for a loan is all about timing. Unfortunately, there’s sometimes nothing you can do but wait. It’s not your fault if your banker thinks a recession might be coming or if you’re in the middle of one. During these times, it can be difficult for anyone to get a business loan or any other type of credit. However, it can also be a sign that it isn’t a good time to start a business either. If it’s not the right time to take out a loan, you can try waiting until later. Alternatively, there are lots of other methods you can use to secure funding.

Secure the Loan
It’s not always necessary to have a great credit score to get a loan. Another option is to secure a loan with collateral. Having something to secure your loan against will make your banker feel a bit safer. If you’re unable to pay back your debt with profits, you can do it with whatever you use to secure the loan. It might be something from your personal life, such as your home or car. You can also use business assets to secure your loan.

Have a Contingency Plan
As well as your business plan, creditors often like to see that you have a backup plan. It’s always best to think about what would happen if everything went wrong. Having a contingency plan shows that you think ahead, and you don’t wait for something to happen. If you have an idea of what to do in any scenario, you won’t panic when something goes wrong. You’ll already have everything decided, so you can just put your plan into action.

Know Your Credit Types
You’ll be more likely to get the loan you need if you first know what type of loan you need. There are different sorts for various purposes, so have a look at what’s available to you. If the loan is suited to your business, your banker will be able to help you out. If you’re not sure, you can ask them to help you out. They can give you advice on which type of credit is the best for you.

Work with More Than One Banker
You don’t have to stick with just one bank. It can be beneficial to you to have accounts with more than one bank and to get to know your banker at each. You increase your chances of securing a loan when you keep your options open.

It takes some work to get a business loan if you need one to expand your company. Get everything in order before you approach your bank.

Photo by Gelner Tivadar | Shutterstock

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