Small businesses have been hit hard by the coronavirus pandemic, leading many owners to find loans that will help to get them back on their feet. When it comes to loan eligibility, the criteria points for small businesses are different to the criteria for personal borrowers, but this does not mean that businesses are less eligible. However, there are a few factors that may be preventing small businesses from finding the funding they need.
1. Poor Credit History
Credit reports are one of the main tools that lenders will use to determine a borrower’s eligibility. While individuals may be able to find bad credit loans online to help if they have a poor credit score, it may be more difficult for small businesses. Make sure you check your personal and business credit scores to ensure they are accurate, and aim to build your credit rating to ensure you will be accepted. The better your score, the more likely you are to secure a loan, but you can use an eligibility checker to see if there is a lender that will accept your current rating.
2. Lack Of Business Plan
Being able to offer up a solid business plan is a lot more attractive to a lender. You need to show that you have a thorough plan for your business and have the ability to show direction. It is not uncommon for very small businesses to not have a comprehensive business plan, so you should put in the effort to develop one before applying. You should also be prepared to explain how you plan on using the money you borrow and show how it will be beneficial.
3. Too Many Loan Applications
As with loans for personal borrowers, applying for too many credit options in a short period of time can damage your credit rating and lower your chances of approval. Some small business owners assume that they can cover all bases by applying for multiple loans, providing them with a way to pick and choose from a range of potential offers. However, this can be detrimental to your credit score, so use eligibility checkers to view your chances of approval first.
4. Failure To Shop Around
Finding a lender can feel like such a daunting task that it is easy to just sign up with the first one you find. It is wiser to explore your other options first and do comparisons to see which lender would be best for you and your business. You can look at a variety of traditional and alternative lenders to find the best fit for your goals, and use comparison sites to help.
The final thing that we recommend is to organise yourself and your business to ensure that you have all the necessary paperwork on hand for your loan application. Obligatory documents often include a business plan, financial records, and legal paperwork. You may also need proof of collateral, depending on which type of loan and lender you choose. Care should be taken when an application is put together, as errors could land it in the rejected pile. Make sure everything is filled out in as much detail as possible, and that all required documentation is readily available.
While it may seem that individuals find it a lot easier to secure a loan than a small business owner, the truth is that there are plenty of options available. You simply need to spend some time putting your application together properly and ensuring that you might the lender’s eligibility.