In a utopian world, entrepreneurs, including you, would have all the resources they need to turn an exemplary business idea into reality. But this is the real world where entrepreneurs face real problems such as lack of enough funds to expand their entities.
Thankfully, it’s also a world full of solutions. It is one in which business owners who are tight on funds can take out commercial loans. On that note, how can you improve your odds of getting approved for such a loan?
Create a Killer Business Plan
A robust business plan increases your chances of getting approved for commercial loans. Therefore, if you’re taking out a loan to expand, ensure you create a business plan that gives the lender confidence to invest in your business and to believe that you’ll pay back what you owe. Include a well-detailed summary and description of the ideas you have in mind, comprehensive market analysis, and a sound strategy on how you plan on propelling your ideas to fruition.
Work on Improving Your Business’s Health
Most lenders will often consider funding your venture if your business is in good shape. If you’re knee-deep in debt and you’re yet to accomplish a majority of your objectives, then getting approved might be more of a pipedream.
Therefore, if you feel like you may need to apply for a commercial loan in the future, work on improving your business health. Meet your sales quota and increase your monthly revenue. Also, start accepting credit cards and cashless payments. This is because the more the number of deposits you get in your business account, the higher your odds of getting approved. Don’t forget your credit score as it’s also an essential factor that lenders will consider while evaluating your application.
Try Out Different Lenders Other than the Bank
Whenever “commercial loans” are mentioned, most people are quick to think about the bank. However, while it’s good to build your relationship with your bank, your chances of approval are significantly higher with a private lender.
Invest in Yourself
You cannot convince others to believe in you or your plans if you don’t believe in them first. So another way to increase your odds of getting approved for a commercial loan is to invest in yourself. If you require funding to expand your business, buy equipment, or cover operational costs, then take a step to show lenders you believe in your plan by investing what you have in it. Most lenders are often more willing to approve a loan if the borrower has at least 25% equity in the project in question.
Brace Yourself for Any Outcome
Even though all the above tips significantly improve your chances of being approved for a loan, you should remember this isn’t a perfect world. Therefore, brace yourself for any outcome and have a backup plan. For instance, prepare separate multiple repayment plans in advance to avoid any hassles in the future.
If your application is rejected, show the lender your multiple repayment plans. Alternatively, suggest a more valuable asset as collateral to convince them even if it wasn’t part of your application.
Getting approved for commercial loans isn’t easy. However, you can increase your odds of getting approved by using the tips above.
Note: A loan is a big deal and can easily lead your business down the drain if you’re not too careful. Ensure you get one from a licensed and respected lender like North Avenue Capital.