You run your own business and find yourself in need of money for operating costs, inventory and payroll. A business loan may be the solution to giving your business the best chance to make it. Here are a few things that banks look for when deciding whether to approve or deny your loan.
1) Credit Score
Your credit score is one of the most significant indicators that you are a financially responsible person. Banks want to know they can trust you to pay your bills, vendors, and lenders on time. A credit score of 700 or more shows you’ll know how to properly manage any money they lend you.
Banks want to protect themselves in case your business struggles, leaving you unable to pay back the loan. Should you default, they’ll try to recoup their investment by taking ownership of your vehicles, property and personal assets.
3) Business Size and Age
A brand new business will have a hard time getting a loan, but having a large business can improve your odds. With too small of a following, the bank will see it unlikely that you’ll make enough money to cover your expenses and pay them back. Your chances of an approved loan increase if you run an established business with a large customer base.
4) Your Knowledge and Experience
Are you opening your own business based on your decade of experience in the field? Or, are you risking it all on a hobby? Banks want to know that you have the industry knowledge needed for success before handing over any cash.
When you approach a bank for a loan, be fully prepared with any documents you might need. Your first impression tells them a lot about how you’ll run your business. Showcase your expertise, have the numbers for your credit and collateral, and detail your plan to pay back the loan on time.