How to Boost Your Chances of Getting Approved for Business Financing
Business loans are a common financial solution for businesses large and small. Business loans typically have appealing interest rates and generous terms. The thing is, though, that getting approved can be difficult for some business owners. If you’re looking to apply for a loan, here are a few tips that can help you to boost your chances of getting approved for business financing.
Improve Your Credit History
One thing that lenders tend to look at is your personal and business credit histories. Typically, the higher your score, the less of a risk you are and the higher your chances of getting approved.
If your credit score is less than perfect, improving it will help to improve your chances of being approved for business financing. Make all of your payments on time. Decrease the amount of debt you have to boost your debt-to-credit ratio. Mix up the types of credit you have (credit cards, loans, lines of credit). Just be careful not to go crazy as you don’t want too many open accounts.
Strengthen Your Business
Along with your credit scores, lenders look at the financial health of your business. They look at your gross monthly or annual revenue and your cash flow to ensure that you have sufficient funds to make repayments. The more stable your cash flow, the less risky you’ll be.
Look for ways to boost your cash flow. This might involve increasing your customer base, encouraging existing customers to return, or raising your prices a bit.
Choose the Right Financing Option
Traditional bank loans are one of the most well-known financing solutions for businesses, but they aren’t the only ones. There are plenty of lenders (credit unions, local banks, online lenders) that offer various financing options. If you don’t qualify for a traditional loan, take a look around to see what else is available and what might best suit your needs.
New businesses face an additional challenge if they’ve only been around for a few months. Many lenders look for a minimum business age of six months or more. Being new doesn’t mean you can’t get financing. It just means you may need to look to alternative sources like crowdfunding or startup loans until you’re more established.
Just because it can be difficult to get business financing, that doesn’t mean that It’s impossible. Working on your credit history (both personal and business), focusing on strengthening your business, and researching the best funding options for your needs will help you to improve the odds that you get approved for financing.