7 common mistakes when applying for a business loan
Applying for the wrong loan product
With the multitude of business loan options available, it is easy to mix up which loans to apply for and what their purposes are. You should ensure that the loan you are applying for is suitable for your funding needs.
Lack of a business plan/Unclear funding objective
Lenders want to see that you have a clear business plan. If you know how you are going to use the money, how the money helps your business grow, and how you will repay the loan, then this should all be written down and presented to your lender. You have to detail how your expenses are necessary to your business.
Lack of collateral
Collateral will strengthen the lender’s confidence in your ability to repay the loan. You should know what your business can offer as collateral or if you personally have assets to guarantee a loan. In the case you lack collateral, you can apply for a loan that uses your future loan’s purchases as the collateral instead, like inventory loans.
Some loans, such as an SBA loan, require extensive financial documentation. While it can be a hassle, all those financial documents must be provided or else the application process can be delayed or lead to rejection. Additionally, you should make sure that all financial documents are up to date.
Misrepresenting income and expenses
It can be very tempting to inflate your income and minimize your expenses to boost your chances at qualifying for a loan. However, this will almost always be counterproductive. Lenders will normally have access to your financial records, and if they see discrepancies between the financial records and your figures, it can lead to instant disqualification.
Misunderstanding lender qualification requirements
This should be obvious, but make sure to actually read and understand the lender’s requirements for the loan option you are interested in. Make sure you meet the basic eligibility requirements listed by the lenders.
Mismatched business information
Again, it should be emphasized that you must be clear, transparent, and honest when applying for a loan. All your information, from your company name to your e-mail address, should be consistent throughout all your forms. Any inconsistencies with the business information that you provide to lenders can delay the business loan application process or even terminate it.
Accel Business Funding has many different funding options for all businesses and funded many businesses for more than $380 million. When banks say NO, we say YES to funding in 24 hours!