Roughly 30% of small businesses fail due to financial reasons, which can intimidate aspiring entrepreneurs who are wanting to start their own business. Making a big investment to grow your business long-term is smart future planning, the only problem with this is figuring out how to get the money you need.
60% of Australians said that the thing holding them back from starting a business was financial problems, however only 32% of small businesses are approaching banks for aid.
The money is there for those willing to get it, however most people aren’t sure how to go about securing a business loan. Find out more about common mistakes that you should avoid to prevent the lender from denying your loan application.
Dishonest Financial Figures
When filling out a loan application, you will need to provide potential lenders with information regarding your business finances, including your cash inflow and outflow. A lot of small businesses think it’s a smart idea to skew these numbers in their favour. While this looks good at face value, most lenders will see through this trick and deny the application.
With extensive knowledge in the industry and the ability to review applicant’s bank transactions, your prospective lenders will find out if you’re being honest or not. Being honest with financial shortcomings or mistakes you’ve made are a lot more likely to be overlooked than an attempt to deceive a lender.
Applying Incorrectly
With so many different types of loans to choose from, as well as a lengthy application process, it can be easy to become overwhelmed. When applying for your loan, it is vital that you are correctly choosing and applying for the right loan product for your business. Staying focused is important, as any errors you make here can result in your application being delayed or even rejected.
Applying With Bad Credit
Potential lenders can run credit reports both on your business and your personal credit, especially if your business is new. An unsatisfactory personal credit report can be taken into consideration when you apply for a business loan.
Even if you’ve had financial troubles in the past, it’s not the end of the world. Lenders may still accept your loan application if they can see recent positive improvement.
Inconsistent Business Information
Attention to detail is crucial throughout the whole application process. You need to ensure that there are no inconsistencies in your application. Spelling errors are a common inconsistency that can hinder your application, as well as outdated information like contact details and old addresses.
Using the copy and paste functions will help reduce your chances of this happening, but make sure you correct any mistakes that do occur. Incorrect information can result in delays, the rejection of the application or having to deal with the loan being approved with the wrong information.
Knowingly providing false information to a bank can sometimes cause legal issues, depending on the circumstances, so make sure everything you provide is correct to stay on the safe side.