There are many lenders, in various forms, including traditional banks and alternative lenders, looking to extend credit. But often, small businesses can become their own worst enemy when it comes to applying for loans.
Here are some tips to increase your chances of successfully accessing loan capital.
START A RELATIONSHIP WITH THE BANK EARLY
It's human nature to not seek resources until you need them. However, relationships built early always have a stronger impact. Seek out a relationship with a banker before you need it. While there's no secret place where lenders congregate for you to approach them, you can attend events or ask for referrals from people in your network, such as lawyers, accountants, or entrepreneurs and business owners. Additionally, you can build a banking relationship through checking accounts, credit cards, and other banking products. Nurturing this relationship will create a solid foundation when you do need a loan.
RECEIVE YOUR PERSONAL CREDIT IN ORDER
As a small business owner, you are closely linked to your business's financial success. This means your personal creditworthiness will be a factor in securing a loan. Pay attention to your personal debt and improve your credit score before seeking bank financing for your business.
HAS ORGANIZATIONAL SKILLS
One way to get what you want from a banker is to make their job easier. Help them access funding by engaging in thorough and thoughtful interactions. Prepare your business plan and financial statements before the meeting. If they request documents, send them all in one email with a clear checklist or summary that demonstrates your proactiveness. This may seem obvious, but many banks emphasize that a lack of organizational skills (or awareness of them) is a major barrier to successful lending.
UNDERSTAND YOUR NUMBERS
While equity investors are compensated by the company's growth, banks or other lenders are compensated by your repayment of your loan at a small interest rate. This means they cannot accept the same type of risk as equity investors and often focus on your assets, cash flow, or both. Be clear about what you can use as collateral or how much cash flow you generate each year to repay the loan, as these are particularly important metrics for lenders.
UTILIZING LOCAL RESOURCES
If you feel overwhelmed and don't know where to begin, or need help creating a business plan or financial plan, try using local resources like SCORE and SBA, which provide a wealth of resources for small business owners and aspiring entrepreneurs.
Source: Saga.vn
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