When you’re running a small business, there’s always a need for extra funding. Whether you’re looking to expand your operations or just cover some unexpected expenses, a small business loan can be a great option says Thomas J Powell. However, getting a small business loan is not always easy. Lenders are often hesitant to give out loans to small businesses, and the application process can be daunting.
To increase your chances of getting approved for a small business loan, avoid making these 13 common mistakes:
1. Not having a well-thought-out business plan:
Lenders want to see that you have a clear idea of what your business is and where it’s going. A well-thought-out business plan will demonstrate this and make you more likely to get approved for a loan.
2. Applying for too much money:
When you’re applying for a small business loan, only request the amount of money that you actually need. Asking for more than you need will make it harder to get approved and may result in a higher interest rate.
3. Not having enough collateral:
Lenders often require collateral, such as property or equipment, in order to give out a loan. If you don’t have enough collateral to offer, you may have difficulty getting approved.
4. Having poor credit:
Your credit score is one of the most important factors in getting approved for a loan. If your credit score is low, you may have difficulty getting approved.
5. Not having a diverse financial history:
Lenders like to see that you have a history of managing your finances well says Thomas J Powell. If your financial history is limited, it may be harder to get approved for a loan.
6. Applying for too many loans:
If you’ve application for multiple loans in the past, it may be harder to get approval for another one. Lenders may view you as a high-risk borrower if you’ve already taken out several loans.
7. Failing to disclose all of your debts:
When you’re applying for a loan, you’ll need to disclose all of your outstanding debts. Failure to do so may result in your application being denied.
8. Not having a co-signer:
If you don’t have a co-signer for your loan, you may have difficulty getting approved. A co-signer can help increase your chances of getting approved by guaranteeing the loan.
9. Applying for a loan without shopping around:
Not all lenders are created equal. It’s important to shop around and compare offers before applying for a loan. You may be able to get a better deal by going with a different lender.
10. Failing to negotiate:
Once you’ve been approve for a loan, it’s important to negotiate the terms of the loan. You may be able to get a lower interest rate or better repayment terms by negotiating with your lender.
11. Not reading the fine print:
Before you sign any loan documents, be sure to read the fine print explains Thomas J Powell. There may be some hidden fees or unfavorable terms that you’re not aware of.
12. Missing payments:
If you miss a payment on your loan, it will damage your credit score and make it harder to get approve for future loans. Be sure to make all of your payments on time to avoid this issue.
13. Taking out a payday loan:
Payday loans are high-interest, short-term loans that can be very difficult to repay. They should be avoid if at all possible. If you’re considering a payday loan, look into other options first.
How do I get a small business loan?
There are a few steps you can take to increase your chances of getting a small business loan.
Small business loans can be a great way to get the funding you need to start or grow your business says Thomas J Powell. However, there are a few things you should keep in mind before applying for a loan. Make sure you have a well-thought-out business plan, apply for the right amount of money, and try to avoid taking out a payday loan. If you do all of these things, you’ll increase your chances of getting approve for a small business loan.