Startup Finance Tips And Advice

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All entrepreneurs would like to have the resources needed to bring their business ideas to life and turn them into huge successes. Unfortunately, we are far from living in a perfect world, so this isn't how things actually happen.

A brilliant idea is only the start of a difficult journey. Most entrepreneurs would need a small business loan, in order to be able to make things move. Such loans are hard to get, so you have to be prepared to show those banks that your idea is worth investing in.

In order to understand how mechanism of getting a small business loan, you should put yourself in the shoes of the lender. If you were to give this loan, would you be confident that the borrower is going to pay it back to you as scheduled? What kind of information would you need, and what questions should you ask the applicant, in order to maximize your chances to take the right decision? Trying to see things from the lender's perspective may help you overcome your natural bias.

These being said, let's see what you can do to increase your odds of getting your loan.

  1. Start Early

Beware that the loan approval process may take weeks, or even months. Filling out an application is only the first step. This is why you should consider starting this process as soon as possible, long before you're actually going to need the money you apply for.

  1. Watch Your Personal Credit History

You may wish to separate your business from your personal finances, but banks and other financial institutions will surely assess your personal credit history when evaluating your risk level from a lender's standpoint.

If you have reasons to worry about this part of the application process, find ways to improve your credit score. Apparently, your credit score is the result on five factors: your payment history accounts for 35% of this score, your credit utilization accounts for 30%, your credit age factors in another 15%, your account mix 10%, and your credit inquiries 10%.

Since payment history and credit utilization have such a massive influence on your credit score, you should strive to pay your bills on time and to use less of your approved credit line. This may lead to an increase of your credit score within a few months. There is the option of a site like https://www.guarantor.co.uk, however the more straightforward the better. You have to be aware that a score of 660 or lower isn't going to help you get any loan. Most lenders take into consideration only applicants with credit scores of 720 or higher.

  1. Have A Detailed Business Plan

When asking for a loan, be specific about the things you need the money for. General responses won't do you any favor, as lenders want to know exactly what you're going to do with their money. This will help them determine whether your plans are feasible or not.

Although every business is different, there are areas that require using a loan such as inventory purchase, business development, capital investments and overhead expenses. Refinancing or paying down debts are also solid reasons for asking for a loan, but lenders won't appreciate them too much. Here are some tips on creation of a business plan.

  1. Be Organized And Prepared For Everything

Whether or not you're going to be approved for a small business loan, you have to be organized in your activity. If the lender asks you for information other than the one already included in your application file, you have to provide it as soon as possible. If you need a lot of time to produce the required documents, lenders may understand you're a risky client.

The best you can do is to prepare everything long before you start your application process. Organize your activity and your business in a way that would enable you to find any document or piece of information a banks might ask you to show.

  1. Seek For Expert Advice

Simply walking in and asking a loan officer for $100,000 to expand your business is something that may or may not work. On the contrary, setting up a meeting and explaining how you've reached the figure you're asking for is something totally different.

 

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Comments 1

Ron Immink on Tuesday, 31 October 2017 11:06
Is business planning still relevant? https://www.business-achievers.com/insights/is-business-planning-still-relevant
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