In today’s modern world, new businesses are cropping up all over the place. Every day, you see a new shop on every corner. Many entrepreneurs require a small business loan in order to get started on living their dreams. However, there can be problems with getting a business loan right away, especially for start-ups. At Finance Factory, we want to help you understand where many business dreamers go wrong when applying for a small business loan. Below, we’ll talk about the most common obstacles standing in the way of you and your business truly taking off.
Problems with Getting a Business Loan for My Small Start-Up
Some of the most common problems with getting a business loan are obvious, but not many understand what they really mean. Here, we’ll explain everything, including ways to avoid these issues and fix them.
Not Enough Money
Really, the first thing lenders review when you apply for a business loan is your cash flow. We want to know if you’ll be able to pay back the loan with the money you have on hand. Not having enough money is probably one of the biggest problems with getting a business loan. Lenders cannot afford to take the risk of loaning you money if you cannot repay them in the long-run.
The best way to prevent not having enough money is to calculate your business income, at the very least, on a quarterly schedule. You should always know where you are and where you need to be each month before hiring new clients, ordering supplies, or making big purchases of any kind. Do this before you approach lenders. It will be more effort on your part of working hard and scrimping where you can, but it is the best way to optimize your cash flow and get it where it needs to be before applying for a loan.
Bad Credit History
No one can hide from their credit reports. This is one aspect of loan applications lenders combs through extensively. If you have bad credit, your credibility will be scrutinized and you could be rejected from your loan application. Bad credit can come from anything – illness/medical bills, maybe a missed student loan payment, store credit cards, and so much more. Some businesses, however, look at personal and business credit history separate. With Finance Factory, we look for strong business credit scores separate from you personally.
Your business credit score will determine how much your business is approved for, what your interest rate will be, and what length of payment term you receive. There are alternative means for financing your company that does not involve conventional banking. This includes online lending, venture capitalists, crowdfunding, or invoice advances.
Lack of Planning and Disorganization
Spontaneity never looks good during a business proposal for a loan. Most banks and lenders require a well-organized, detailed plan for your business. They want not only quality but a quantitative business report. This can be tough for start-ups. Most start-ups are a constant work in progress before solidifying everything. One of the best things a small business entrepreneur can do here is to develop a report that forecasts potential earnings and come up with a semi-constructed plan outline. This will give those reviewing your case a basic idea of your plan and what you should be making.
Disorganization is another turn-off to lenders and financial advisors. One of the many problems with getting a business loan can come in the form of disorganization. You’re dealing with professionals, so be professional. You do not have to be the smartest person in the room, but your delivery and presentation should be straightforward. Keep and have all the paperwork in one location and on hand to provide at any time.
The Process Can Be Time Consuming
Waiting on a bank or lender to make a decision about your business loan can take time. They have to calculate risk factors, look at your income, your business plan, your credit debt if you have it and so many other factors. There is a lot to consider when reviewing a loan application. Plus, it isn’t always in the best interest of those lending you the money to do so right away. Sometimes, the process can take as little as a few weeks, and as much as several months. There isn’t much advice on how to avoid the length of time this process takes except to be as prepared as possible and learn to be patient.
How We Can Help
What’s great about working with Finance Factory is that we have a process to help determine your keys to success. By working with us, we can figure out the factors behind things like your cash flow and your credit scores. We offer a free, 12-point business success assessment which shows you where you stand for funding and lender compliance. We can show you what your funding ranges are and how you need to improve moving into the future. If we choose to fund your business, we will help you complete our entire 12-point elements to reach all of your goals.
We’d love to get to know you and hear about your start-up! Do you have more questions about the problems with getting a business loan for your small business? Or would you like to meet and discuss your need further? Reach out and we’ll be there.
Interested in finding funding for your business? Finance Factory would love to help! If you’re looking to fund your business within the next 30 to 90 days for $25,000 to $500,00 and have a credit score of 660 or better, let’s chat! Get pre-qualified right now with our quick-step pre-qualification form! And don’t worry, this will not result in a hard credit inquiry of sensitive information. We just want to learn more about you and your business. Click below to get started!