Small business loans can be a huge help for growing your company whether you’re a relatively new owner or an established entrepreneur. Once you’re approved, you can use the funds to invest in valuable equipment, a great real estate location, discounted inventory, business acquisitions, and many other needs. How can you increase your chances of getting your small business loan application approved? Follow these helpful tips and avoid common mistakes.
Don’t Exaggerate Your Revenue
Many loan applications require you to report your company’s annual revenue. It can be tempting to guesstimate or exaggerate the amount, thinking that this increases your chances of qualifying, but imprecise figures can hurt your application.
Conventional lenders expect you to back up your estimates with financial documentation, such as balance sheets and other reports. Even alternative financing businesses are more likely to approve your application if you show proof of stable income.
Some applicants exaggerate revenue accidentally. They base their figures on future revenue resulting from the loan. For example, construction businesses may make the mistake of calculating the revenue they expect using heavy machinery they haven’t purchased yet.
Unfortunately, Lenders aren’t convinced by “what-ifs.” Be honest and direct about the amount of revenue your company has. Good lenders can be flexible with the loan size depending on your income.
Calculate Your Expenses Honestly
This part is for your business’s financial health, not the small business loan application process. Getting a large loan is great, but only if you can truly afford it. If your company ends up struggling with monthly payments, loans become a liability rather than a benefit.
This is another area where working with the right lender can help a lot. It’s often possible to customize a loan to make your business’s finances less stressful. There are payment structures that adapt to seasonal business needs, for example. It’s also possible to lower the size of monthly payments with a larger down payment, or vice versa.
Look Into Leasing
What if your company’s finances don’t seem to support a small business loan currently? You have many alternatives that can help you get the things you need. In the case of equipment, more business owners than ever are choosing leasing instead of buying.
Leasing is an accessible option for getting your business’s equipment and protecting your working capital. The size of lease payments is small than the size of loan payments for the same equipment.
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