For many small and medium businesses, business finance can be their ticket to success. Additional finance can solve cash flow problems and may be used to enable growth.

There’s just one problem: business loans can be hard to secure, especially from banks. 

So if you need business finance, it’s a good idea to prepare your application in advance. To get you started, here are five ways to improve your chances of being approved for Business Finance. 

1. Build Your Credit Score

Most finance providers will take a look at both your personal and business credit score and history when reviewing your loan application. This means that if you’re planning on applying for a business loan in the future, you should start building your credit score now

Improve your credit score by paying bills on time and clearing as much old debt as possible. Being smart with a credit card, or even better a business credit card, can also bump up your credit score — make one-off purchases and pay your bill in full at the end of each month. 

2. Create a Thorough Business Plan

Finance providers will want to see that you have a plan in place for managing finances and initiating growth before providing finance, so before applying for financial support, you should have a thorough business plan

A business plan will give you a clearer idea of how to progress and will prove to lenders and finance providers that you have long-term plans and goals for your business. It also shows that you’ve considered how you will manage your funds and use it to improve your financial situation. 

Any finance provider that considers supporting your business, will first check that you’re worth investing in and that you’re a low-risk lendee. Proving that you can think ahead and manage your finances shows that you’re a good candidate for a loan or finance. 

3. Consider Alternative Finance

Banks can have low approval rates when it comes to business loans. If you don’t have the best credit rating or you haven’t been established for very long, it’s unlikely that you’ll be approved for a bank business loan. 

However, there are other business finance options you can consider. Alternative finance providers offer business finance with higher approval rates. Many alternative business finance providers will also consider your application based on more than just your credit score. They’ll take into account your business’ overall performance. 

4. Prepare the Right Documentation

Regardless of the finance provider you apply for a loan or finance from, they will usually ask you for certain documents before considering your application, and it’s worth having these ready before you apply. 

Make sure you have your business plan written up, your personal and business credit report, and any tax returns and bank statements. You may also need a list of your current and aged debtors and creditors. Most business finance providers will outline what documents you need on their website, so you can prepare these in advance. 

5. Only Apply for What You Can Afford

Finance providers have worked with hundreds of businesses, so they have a pretty good idea of how much finance businesses need to achieve their goals. If a finance provider suspects you might struggle with the repayment of a loan, they’ll reject your application. 

To give yourself the best chance of being granted a loan or finance, first think about what you can afford each month. Consider how much you need, what you’ll do with the funds and how long you want to spend repaying the loan. 

A longer loan repayment period can mean more affordable monthly instalments, which can give you the freedom to borrow more. If you’d rather spend less time repaying the loan, you’ll have to make larger monthly repayments. In this case, to keep costs down, you might need to consider borrowing less.

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