I want to apply for a small business loan. What kind of things does a lender look at? I’m a little worried that I may be turned down. Who do you think I could approach, so that I may have a better chance?
I hate to disappoint you, but it may not be so easy. Don’t get me wrong though. By all means, you have to go for it, right?
Just remember that business loans tend to be higher than personal loans. This means that it is also likely to be stricter.
Not surprisingly, a lender will look at your credit history. If your business has been around for a few years, this is easily done.
However, if you have a new business, it may not be as easy. In this case, the lender will most likely look at your personal credit history. Don’t get upset or be deterred by this. It is normal in this instance.
After all, if they cannot derive anything from your business history, they need to know how you managed your other financial dealings. It’s their money, so they won’t just hand it over without looking into your background. If you managed money well in the past, then they would be open to lending you the finances.
A lender will want to see if you have the ability to pay back the loan. This is understandable.
Put yourself in their shoes. If a friend asks to borrow a large amount from you, you may be hesitant. You know your friend can be a spendthrift. You won’t be confident in the money being returned. You will have to keep chasing him or her and he or she will keep giving excuses. A lender won’t want to go through that.
The lender will want some kind of assurance that you can pay back monthly. If the lender believes that you can do this, then your chances of being approved increase.
If your current situation does not seem like it can do this, then of course it’s not going to look good for you. They may suggest a minimum requirement. If you will struggle with this, then it is unlikely that you will be approved.
One question you will be asked is what you want the loan for, or at least how you will use it. For example, if you need the money for something that may increase revenue, then your chances will be good. This way, they know that they will get their money back.
What you could do is contact someone like Thinking Capital and talk to them about your situation. The best thing right now is to talk to the experts. If you have some kind of plan, that will be helpful. If not, perhaps they can advise you on what steps you need to take.
If you are approved, then if you need a loan again in the future, you can approach the same lender. This time, your chances of being approved will be greater.
Good luck with everything!
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