7 Mistakes You Should Avoid When Applying for a Business Loan

7 Mistakes You Should Avoid When Applying for a Business Loan

Business, Finance

Financial matters in business are much more complicated than your personal monthly budget. The smallest failure or flaw can make your business go of the track.

Applying for a loan for commercial growth is one of the most common and frequent activities for a businessperson. Of course, you can relate to it. Loans help in the countless types of circumstances. They are the saviours and provide support in the tough time.

It becomes necessary that when you send the application to the lender, you avoid certain mistakes that may bring rejection on application. To avoid those mistakes, it is better to know them in advance and then send a flawless request to the lender.

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1. Not knowing your credit rating

A businessperson who is not aware of his/her own situation can never grow. Credit rating is the basic thing that you should know. Whatever credit score your business has, it should be in your good knowledge.

Any slightest degrade or rise in the score should also stay updated in memory. This is necessary because if the credit rating is poor, the application should be sent to the specialised bad credit loan lender.

Similarly, in case of good or excellent credit rating, it is easy to explore many opportunities that lending companies offer for having a good payment history.

2. Not explaining the purpose of the loan

The lenders want to know your reason to apply for the funds. It is necessary for them in making approval decision on your loan request. They need to ensure how the funds are going to help in the fulfilment of purpose.

This is also necessary to check your affordability against a particular purpose. Missing the information on this part is a loss for your own business.

It is necessary to tell the lender about your intentions on the use of the loan amount. Without this, it may not take the request seriously and the finance industry really does not have time to chase people to ask their concerns.

3. Not reading terms and conditions carefully

Are you joking?? There can be no escape from this mistake if once the loan is approved. The lending companies have different policies and they may not tell you each and every word of their lending policies.

They consider it as the responsibility of the fund seeker to read the terms and conditions carefully. If something goes against your expectations, there can be no use of blaming anyone.

Also, there are few unethical lenders that may try to trick you. In the disguise of the small font, they hide their conditions that act as the trap later. For instance – hidden fee, upfront fee should not be taken by the applicant. You may fight a case against the lender but the time it takes is a loss for you only.

4. Making major changes in business structure

In any case, the lender should not see any kind of instability in your business structure. Doing any changes few days or even months before applying for the loan is a HUGE mistake.

At least, until the funds reach to your account, there should be no change at least on the large scale. Due to ignorance, many people do not understand the adversity of such things. They do the changes in the business model and face the chaos in the form of rejection on the loan. It is too late now and nothing can be done.

The lenders do not want to work on a risky bet. Any kind of change inside the business makes them sense the weakness. Even if nothing is wrong, they get into doubt. In case of small business, it becomes even not more complicated because the process of taking out a small business loan from British-lenders.uk in London, United Kingdom goes through many gatekeepers.

5. Applying to many lenders at the same time

In the haste to get money, many applicants do this mistake. They want the funds as soon as possible and thus approach to many lenders at the same time. Are you on the same boat? Don’t do this to your business. Many applications bring the mess of multiple search footprints, which makes you look credit hungry.

Always apply to only one lending company at a time. The business credit records cannot afford to have so many credit check footprints at one time. If still, you do not understand, denial is the first thing to come in response from the lender.

6. Failure to provide collateral equivalent to the loan amount

The lenders need some sort of security if the amount you demand is big. Before applying for a particular figure, always make sure that the collateral is available and is equal in value of the loan amount. However, in some cases, collateral is optional but sometimes to get a lower rate or borrow the required amount, you can provide asset as the back up of repayments.

If you are planning to offer a security asset then make sure it is sufficiently valuable to back the loan application. Those who fail to do so do not get money and in fact get an embarrassing mark of rejection on the financial records. This can affect your chances to explore the future financial opportunities.

7. Not having updated financial records

A careless attitude towards the management of financial records leaves a bad impression on the lending company. It is vital to show the recent financial details and if your accounts have not been updated since last 6 months, you are creating chances of denial. It is like spoiling your own future.

Do not put the cart before the horse and keep the financial details and documents updated. From smallest to biggest transaction, details should be there. The loan lender companies do not compromise even a bit on this aspect. After all, this is what helps them measure your affordability against the loan. Besides, it is not about loan, for a businessperson, it is always necessary to keep the records updated.

Conclusion

The above mistakes may look small but they have a big impact as their result in the form of loan rejection may affect your business on many aspects. A bit of cooperation from your side and a bit of smartness in the loan application process can help you borrow funds easily. If actually the concern to borrow money is urgent and important then stay cautious. It is necessary to act in the required manner otherwise, regret will be your only companion. Get up and rectify all your mistakes and get approved for funds SMOOTHLY.

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Author: Stacey Walsh

I am Stacey Walsh. I lives in London and working as a content writer at Blogonfinance.

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