Last week on SBL04, we examined the reasons why your business loan application may have been denied. On this edition, we will offer tips on how to improve your chances of getting that loan. Note that these are still subject to risk assessment and verification by the lender so these points are not silver bullets in any way.
1. Pay yourself a salary
This sounds really straight forward but it actually helps. When you have a history of being able to pay yourself a regular salary, it shows certain stability of cash flow, which would make it easier for you to apply as an individual (not a business). While you might not be able to get as much as you would have as a business, you can hold back on paying yourself for that month, while using the loan for personal expenses.
2. Separate bank accounts
You should have separate bank accounts for you and your business, as both of you are different entities. It’s harder for lenders to assess your creditworthiness when your personal expenses are mixed with those of your business. Besides, your business even looks more professional.
3. Bank your cash regularly
If your business is the type where you have to receive cash from your customers, it would be good for you to deposit the cash at your bank on a regular basis (say every Friday for instance). Better yet, do not lump up amounts when making the deposit: rather, make a note of the sales you make each day and use separate deposit slips for each. This way, you know the number of sales you make each day!
4. Ensure your legal documents are intact
It’s a big risk to keep running a business that is not incorporated at all. Without going into the details of trademarks, patents and taxes, you should at the very least, have your company registered with the corporate affairs commission. For business loans, some lenders with the request for your certificate of incorporation, so best get one as soon as possible.
5. Service your loan obligations on time
This goes without saying and is one of the chief reasons you may not be granted a loan, as it impacts negatively on your credit score. Do your best to avoid defaults, in order to maintain very good creditworthiness.
Do you have any other tips in mind? Please let us know in the comment section and remember to share this with your friends.