It’s the cold hard truth – small business financing can be hard to obtain. So prior to meeting with lenders, think how you can increase the possibility of getting your application approved.
In the meantime, consider these tips:
Prove that your business can maintain steady cash flow.
Cash is still king, a critical indicator of a business’ current and future performance. By showing financiers that you have adequate money entering and exiting your coffers, you are telling them that you can pay your staff, employees, creditors, and the others on time. In simple terms, be ready with your financial documentation (bank statements, tax returns, etc.). Expect questions on any fluctuations in your cash flow and offer an explanation ahead of time.
Maintain a reasonable debt load.
Debt load is how much debt you have that is shown on your balance sheet. You should to be able to prove that you can handle not just what you currently owe, but also what you will owe the financier in case your application is approved. If your loan is meant for expansion, explain how this inflowing debt is going to benefit the business.
Keep your payment history positive.
Among the most crucial factors for any financier to consider is the business’ payment history. Your history should reflect a consistent pattern of you paying your debts on time. If the lender has requested a credit report on your business from a third party, ask to review it so you can verify if it’s accurate. That report may not show your big trade partners and other financiers who could provide an impressive reference, and confirm that you are a consistent and responsible borrower. Supply them with references yourself, and remember, these should be names of actual people you’ve worked with, instead of names of banks, your trade suppliers, etc.
Show sound business judgment.
Potential lenders need assurance that you anticipate challenges, and that you have already planned for them. On top of that, they expect to that you have management in place to handle all obstacles that may be in your way. Your business plan – and you totally and obviously need one – should come with all these pertinent details. Also, it must contain a forecast for your business as well given a minimum of two possibilities: your business’ performance if your financing application were approved, and if not.
Comparison-shop for financing.
Don’t assume you will always get the best terms from your bank or the vendor. Spend time checking out a number of companies and the financing options they offer. Find out all the details – Interest rates, terms, fees, and the rest. Now compare and go for the best.