Applying for a loan is scary for many business owners. They often don’t know if they’ll qualify, and whether their business is going to be able to stay afloat if they don’t. Some of the stress of getting a loan can be relieved by assessing the true financial state of your business and asking the right questions. This will allow you to know if you’ll actually have a chance of getting accepted, whether you should review your expectations, or whether you need to reconsider getting a loan altogether. Here are some of the questions you will need to ask yourself before seeking financing.
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What’s My Personal Credit Score?
You should know both your personal and business credit score before you seek out a loan. But, if you haven’t had the time to establish a solid business credit history, your personal credit score will make a big difference in your probability of getting approved. Get a copy of your credit report from Equifax, Experian, or TransUnion. Look over it and see if there are any issues or false entries. If there are outstanding accounts, try to come to an agreement with them and ask them to erase the entry once you’ve paid off. This is known as a pay-for-delete request, and it’s perfectly legal. All you have to do is make sure that the agreement is in writing.
Are They Favorable to My Line of Business?
Some banks will refuse to do business with people in certain industries. This doesn’t have to be controversial either. In most cases, it’s because they see the business as being “high risk”. Some businesses, for instance, are more likely to deal with credit card chargebacks, such as eCommerce businesses. Businesses that operate on a subscription model, routinely conduct high-dollar transactions, or that are in specific industries such as travel, pharmaceuticals, and supplements will often be excluded by banks as well. You will need to look at whether your business could be deemed high-risk. You will then need to see if the bank you were thinking of applying with has a history of turning businesses like yours down.
Should I Go to a Bank?
The real question in all of this is whether you have to go to a bank to get a loan in the first place. If you have a questionable credit history or haven’t had the time to establish any, you are in for a lot of disappointment if you think you should be able to get a bank loan. Most banks are not in the business of helping budding unproven startups and small businesses. They want to attach themselves to companies that are already profitable. We know this sounds harsh because these aren’t the type of business that needs financing the most, but that’s the way it is.
This is why you should consider looking for alternative lenders instead. AdvancePoint Capital offers fast business loans online, and their rates are comparable to what you’d find at a financial institution. The difference between these lenders and banks is that they will be much more willing to look at the general health of your business and not just your net income and projections. They might look at things like your cash flow and accounts receivable, for instance. They will often lend money to businesses in industries most banks shun too. This is why they could be your only option if you have a limited history or are in a tough business.
These are all very important questions that will need to be addressed before you seek financing from a bank. You also need to see if there could be any other alternatives to financing if it isn’t for something urgent.