Mistakes to Avoid When Applying for a Business Loan
Business loans are the much-needed financial boosters that are vital to infuse a new lease of life in your business. If you’re struggling with inadequate working capital, meeting everyday business expenses or envision a business expansion plan or acquiring new machinery but are limited by lack of funds; a business loan is your best bet.
Entrepreneurs prefer business loans as it caters to both short-term and long-term financial needs of a business. Availing a business loan is an important financial decision which requires careful planning and a bit of homework to avoid making any mistakes during the loan application process or facing loan application rejection.
Let’s get familiar with some common oversights to avoid while you apply for a business loan.
Not Knowing Your Credit score
Credit score of an individual/business plays a crucial part in the approval of loan application, rate of interest, and repayment terms. Not knowing the business’ credit score is one of the biggest yet most common mistakes most entrepreneurs make.
If you’re planning to apply for a business loan in the near future, start prepping now by obtaining a copy of your credit report. Study and analyze the report ahead of time to make any amends to boost your credit score. This will maximize your chances of loan application approval when you need it.
Lack of a Business Plan
Having no or inadequate business plan is yet another common mistake most business owners make while approaching a lender for a business loan. Your business plan should cover three common questions asked by lenders while determining the outcome of your loan application – the loan amount you need, the end-use of the funds, and the loan repayment method.
If you want to prepare an ideal business plan, be prepared to answer the above points supported by key business information like operating cost, profits, and future growth potential of the business.
Incorrect Loan Amount
Before you sit down to apply for a business loan, do your math. Ascertain a calculated loan amount based on your current and future financial situation. It’s wise to borrow only what you can pay back conveniently. You can take help of our online Business Loan EMI Calculator to know your estimated EMI.
Default in Financial History
This proves to be an important deciding factor for lenders while evaluating your business loan application. As a business owner, if you’ve defaulted on loans and credit payments in the past, it will have an extremely negative impact on your credit score and the chances of your loan approval.
You can avoid this mistake by keeping a clean slate as far as credit and loan payments are concerned and making sure all your dues are paid on time.
Improper Research of Lending Institution
Not doing a proper check on the lending institution’s background and reputation is also one of the common mistakes many business owners make. Once you’ve decided on the business loan amount and arranged all the documents you’d need, spend a little time on scouring through the credibility of the lender you’ve approached to avoid becoming a victim of any fraud later.
You can check reviews online or ask colleagues, friends and family for personal recommendations to be sure of what you’re getting into.
Not Reading Loan Agreement Carefully
Loan agreements may seem descriptive and long but avoiding reading them can be a mistake. When you’ve the loan agreement in hand, make sure you take your time in understanding every aspect of it. You should be completely aware of all the terms and clauses mentioned in the loan agreement to avoid any disagreements later.
Your future may depend on how well your business performs and like every other important decision of your life; you can’t afford to go wrong with the decision of availing a business loan.
When it comes to secured and fast disbursal of business loans, Clix Capital is the place to be. We offer business loans for working capital boost or investing in heavy machinery/equipment at affordable rate of interest. The business loans we offer are collateral-free and easy to apply.
Feel free to write to us at email@example.com or call us on 1800-200-9898 with your queries.