Keep These Things in Mind if Applying for a Business Loan
Debts can either be good or bad. Business loans are considered good debts if you are using the funds to start up a new venture, replenish your cash flow, stock up on inventory, or to keep your existing one afloat. If you need to secure a business loan, first there are some things you need to take into consideration to ensure that your application gets approved.
Compliance with loan requirements
If this is your first time applying for such loan, you must have a complete list of requirements that you must submit so you don’t have to go back and forth. Have everything required ready when you decide to go to a bank. It may take time to complete everything the bank is asking you, so be ready to accept some setbacks. Set a realistic timeframe.
Avoid guaranteeing personal possessions
Every business owner has a vision that their business will succeed, thus they will guarantee their private properties, such as their house, car, or other properties. If you are a solo business owner, this may be inevitable. But if you have partners or the business is a corporation, it is best to avoid using private properties as collaterals. If the business fails, private properties will be sequestered. It will give you peace of mind knowing that even if the corporation fails, private properties will be safe.
Get help form the government
If you are a small business owner in this time of COVID-19, the government hands out assistance to small business so they could keep afloat. A lot of business closed due to the pandemic; do not let your venture go down the same path. The Small Business Administration or SBA can help you finance your business during this difficult time, so that when the economy fully reopens, your employees will still have a job to go back to, and you can still keep your business running.
Talk with a lawyer
A business loan is a legal binding, and if you do not have the right knowledge, it can be your downfall. Consult a lawyer who is an expert in the field so you can have the leverage when you apply for a loan. You cannot go into a contract with a creditor if you do not know the ins and outs of the transaction. Also, do not make any commitments and put them into writing without consulting first.
Improve your credit rating
Your credit rating will be an integral part of a business loan application. You have to have a reputable credit rating so that creditors will have an assurance that you are capable of paying back what you will borrow. Building your credit rating should start as soon as you get your first job. It is not an overnight process. Be responsible in your finances even when you are young, so that when you decide to go into business, it will be easy to secure a business loan.
Study how your business can keep afloat despite of setbacks – especially financial ones – and do not be disheartened by rejections. Make sure that your business’ financial status is always in good condition.
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