Start up businesses normally encounter difficulty in securing sufficient financing especially when the economic environment is gloomy. Getting a business loan will surely be the best way to secure additional capital. However, there is no assurance that loan applications are instantly and surely approved. Banks are stricter these days because they do not want to lose money from lending to failing ventures.
It is not enough that you have confidence on yourself and on your new business. You have to convince the loan provider to approve your loan application because you carry less or no risk at all. Here are four effective strategies that can help improve the chance of your startup business to secure a loan application approval.
Use your home as security or collateral to the loan.
If you are a homeowner, you will have a greater chance of getting a startup loan approval. That is because you possess a huge asset that can effectively back the loan. Loan providers are most of the time risk conscious. As much as possible, those will stay away from high risks. Business startups usually are included in lender’s high risk bracket. Your existing assets can be an assurance that you can repay the loan amount even if the business fails.
Cite all your existing and current assets in your loan application.
The loan amount approved is often related to the valuation of security placed against the loan. Aside from your home, other significant assets that should be enumerated are shares, vehicles, bank savings, and other properties. Just be careful when doing this because you certainly will not want to lose everything you have if the startup venture fails to draw fire.
Present a good income record.
Compile all your recent tax returns. Those will demonstrate your good personal finance and income history. Starting a new venture will surely affect that. For now, it is important to demonstrate your capability to generate earnings. This way, your lender will be less cautious and approve your loan application.
Submit a business plan.
In the document, account where you intend to use the loan amount. If the loan provider can clearly see how you intend to spend the loan proceeds, your loan application will have a higher chance of getting an approval. For instance, if you are seeking a $100,000 loan, itemize the projected expenses. This need not be complicated. Lenders want to make sure your new business has a good structure and plan especially for allocating budget and repaying financial obligations.
Who would ever want to lend money to a startup that is clearly destined to fail from the beginning? At the end of the day, your startup loan approval will also depend on the prospect of your new business. That is why before you put up one, make sure you have undergone all necessary preparations. There is a need to conduct a thorough market study. Lenders’ confidence on your business will increase your chance of getting a startup loan approval.