A Guide to Getting Your Loan Approved
How to Not Get Your Business Loan Rejected
Nowadays, having a small business opens to you a vast variety of financial options. In order to navigate through all of these options, small businesses need to clarify their reason for requesting a loan, and ultimately decide which type of loan suits them best.
Depending on the choice, a small business funding application process can either take just a few minutes, or even a couple of weeks. Therefore, the duration of the application process can have a big impact towards company’s objectives and goals.
Finding, applying for, and getting approved for a small business loan can be difficult, as around 30% of all bank loan applications are denied. So, the more prepared you are, the higher your chances of getting approved are. The following checklist will help prepare you for a loan application:
- Check your credit score. If your score is lower than average, there are still options for business loans for bad credit, typically with a short-term lender.
- Check requirements and qualifications. Communicate with your lenders about any additional information they might need from you.
- Prepare all documents needed. Potential lenders will want to see your financial information. If you have already a running business, then they might ask for your business profits and loss statements.
- Have a clear business plan. Lenders want to know that the resources you are getting will be used properly, so they want to see a thought-out business plan.
- Check collateral requirements. Find out what you may use as security to get a lower rate.
In the infographic below, Market Inspector discusses loan trends in the UK, some problems that may occur with the application process, and tips on how to avoid getting your loan rejected.
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UK Loan Trends
Despite the slow growth in the UK’s macroeconomic environment, the average amount of money that has been spent in small business financing has doubled for many financial options, however bank lending experienced only a slight decrease, resulting in an increasingly diversified finance market for smaller businesses.
There are new types of lending that are challenging traditional banking models of lending. For example, the amount of funding received by smaller businesses through external equity financing rose rapidly, increasing by 30% from 2016-2017.Peer-to-peer business lending also showed continued rapid growth, rising by over 50% from 2016-2017.
Finally, asset finance has continued the consistent, but slow growth. This increased awareness of options will be important in ensuring smaller businesses are better placed to make the right financial choices.
Before starting any application process, it is imperative that you search and compare different types of commercial loans, to choose the best possible option. This will not only make your objectives clearer, but will also avoid selecting the wrong loan and ultimately costing valuable time and money with an unnecessary application.
Although almost no loan application is simple, it is important to put in the work and preparing all documentation beforehand, in order to increase the chances of getting a loan approved.