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4 Common Mistakes Business Owners Make When Applying for a Loan
Applying for a small business loan can be scary, and the potential for mistakes high. The process means taking a risk that can involve a lot of money. It is also often time-consuming and requires a fair amount of work. All of these factors combined can make applying for a loan intimidating. That said, there are ways to increase the odds of getting a loan. You don’t have to be afraid of making common business loan application mistakes and missing out on funding. Here we present four of the most frequent issues businesses face and how you can avoid them and apply for a loan with confidence.
1. Not Knowing Your Credit Score
Your credit score is one of the most influential factors on your loan. Lenders use it to figure out how much risk you pose. As such, it can impact your interest rate, the total cost of the loan, the amount of money you can receive, and many other factors. Not knowing your credit score is one of the most impactful business loan application mistakes you can make.
The federal government has worked with the three major credit scoring groups to create a website where you can check your score once a year for free. This lets you check your score without any adverse impacts. You can get informed, and it’s key to do so before you apply for a loan.
If you need to improve your credit score, you can:
• Check for unauthorized credit.
• Identify errors – either a mistake you made or clerical problems.
• Pay off smaller debts to improve your score.
Knowing your credit score and optimizing it can go a long way in getting you the loan you need.
2. Not Working with the Right Type of Lender
Banks and alternative lenders work very differently. With banks, the process is highly structured. As such, they use many long-held, often manual systems to approve loans, which makes them high touch and labor-intensive to work with. Although this is great when you need a major loan and lots of consulting help, it’s a problem when you need cash fast.
Alternative lenders are highly digital in nature. They offer smaller loans and get you cash quickly. However, some don’t offer much consulting. At QuickBridge, we provide some advice and guidance to help you get the right loan for your needs.
Not thinking about the right lender is among the common business loan application mistakes you can make, and it’s dangerous. It can set you up for a rejected application and weeks or months of wasted time.
3. Not Looking Beyond the Rate
Interest rates and other costs that come with a loan are important. But using them as the only factor to choose a loan is a problem. It’s one of the business loan application mistakes that can leave you missing out on an opportunity. To find the right loan, think more about value than costs. Some loans may have higher rates or fees, for example, but get you cash faster and position your business to grow immediately. Another loan may have a lower total cost, but come with a long repayment and delayed value delivery. As you can see, it’s vital to find a balance between cost and opportunity for your business.
4. Not Having Your Paperwork in Order
You don’t want paperwork to get in the way of your loan. With banks, you’ll need to be super organized. However, alternative lenders don’t require as much paperwork. Either way, do some research on the lending process and make sure you have your paperwork set.
Stay Away from Business Loan Application Mistakes
Business loan application mistakes are easy to avoid. Taking some time to research the lending process can help you get the right loan for your needs. If you want to learn more, contact QuickBridge today. We’d be happy to talk with you about our process and help you apply for the loan your business needs.