Applying for a business loan can seem like a daunting process. After all, you are requesting funding from someone you’ve never met. Why should a lender lend to you? Is your application even worth their time?
The truth is, yes, it is worth their time. B2B lenders would go out of business overnight if they stopped lending to people and businesses like yours. Entrepreneurs, start-ups, SMEs, even blue chips need finance at some point. And lenders are happy to approve their finance applications – if they’re confident of repayment.
If you’re interested in a business loan, here’s 3 ways to guarantee a successful application – heed them to make sure your application is approved.
- Show capability of repayment
Whether you need a business loan to pay staff, pay a VAT bill or upgrade legacy equipment doesn’t really matter. If your business can show capability of repayment in a loan application, there’s a high chance of approval.
Lenders want to see capability of repayment in two ways. First of all, they want to see business profitability or healthy cashflow. Second of all, they want to see the director’s finances (the person who’ll sign for the loan). This is a contingency for the lender – it shows the director can repay the loan if the business cannot.
- Apply with a good credit score
Even though you can take out a business loan with bad or poor credit, you improve your chances of approval with a good credit score. Your credit score is accessible online through a service such as Experian or Noddle. The latter is free.
Lenders like an average, good or excellent credit score because it means lower risk – on paper. It’s an industry standard benchmark all lenders use. A lender will access your credit report. If they see recent payment defaults or overdue payments, these will naturally count against you. Lenders want to see responsibility and consistency.
- Double check the accuracy of business and director information
It sounds silly mentioning it, but over 50 per cent of business loan applications are rejected because of inaccurate information provided by the borrower. Lenders need information about your business and directors, because it’s the only way to verify who we’re lending to.
For example, when you apply for a business loan with us, we require the names, dates of birth and home addresses for all business owners or majority shareholders in the case of a limited company. We will also require your registered company number, so we can perform a clean check with Company’s House and verify you.
Oh, one last thing…
Don’t make the mistake of requesting money beyond your means. You have to be realistic when applying for a business loan. If your annual turnover is £30k, there’s no chance you’ll be able to borrow £250k. If you’re unsure about how much you can borrow, speak with one of our financial advisors. Call us on 01234 240155 to get started.