Obtaining a business loan is not that easy you must be prepared and organized simply because lenders desire to make loans, however they are only going to make loans when they know they will be repaid. This will depend on how well you present yourself, your business and your financial needs to be approved whether or not you’re applying for a business loan or a personal loan. There are common errors that can impede the process and here are some of them.1. Not being aware of your credit rating. Just before you apply for a loan, you need to know where you stand. Get copies of your credit scores from the three top credit bureaus so you will know if you’re most likely to obtain the loan permitted.2. Not reading the conditions carefully just before putting your signature. With your hurry to get a loan, you might make the common mistake of jumping the gun and signing without reading the information and terms of the loan. Not just should you take some time to read everything attentively, nevertheless, you must as well ask questions regarding anything you fail to entirely understand.3. Not locking in a rate. Interest rates vary. When you believe you have found an excellent rate, lock it in before it goes up. Too often, people make the mistake of getting greedy and waiting around for interest rates to lower further.4. Not explaining what the loan is for. When applying for a business loan, you need to show how the money will be used. Lenders want to see that you know exactly what your needs are and how this loan will satisfy those needs.5. Making big alterations. Just as you don’t desire to open and close numerous bank cards when applying for a personal loan, you don’t want to make significant personnel or other alterations to your current business framework just before applying for a business loan. Creditors need to find stability in how you do business and with whom.6. Applying only to the most convenient lender. Even though there are various lenders accessible, many people still head to their local bank first without shopping around. Credit unions and other options are worth examining. For instance, if you’re a small company proprietor, you should take into account what the Small Business Management are capable of doing via one of their loan programs.7. Not having your finances up-to-date. Whether or not you are seeking a personal or business loans, you shouldn’t apply with out the proper monetary documentation. This is an area where many people put the cart before the horse, and try to obtain a loan without ensuring their financial records are up-to-date.8. Not being able to obtain some equity in the project. Not unlike a down payment when purchasing a home, having some collateral in a business project substantially enhances your opportunities of securing a business loan.9. Having no assets. You must supply some assets, should there be a default in payment.10. Not having a business plan. If you are setting up a business, you need to demonstrate the way the business will run and produce profit. A business plan is important for a lender to see your goals and especially, how you plan to reach them. You have to include all applicable supporting data, including financials.

Utilizing a secured business loan is a great way to ensure a lower interest rate, a longer repayment period, and the opportunity to build credit and forge a relationship between business and credit provider.A secured business loan, also called as collateralization arrangements, is a type of loan where by the borrower pledges some asset as collateral for the loan. These collateral can be anything of value such as car or property, which then becomes a secured debt owed to the creditor who gives the loan.The collateral is a borrower’s pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower’s default-that is, it can be used to offset the loan to any borrower failing to pay the principal and interest under the terms of a loan obligation. Pawnbrokers would be an easy and common example of a business that may accept a wide range of items as collateral rather than accepting only cash.In cases when the borrower may default on a secured loan, for example, due to insolvency, bankruptcy or other event, that borrower forfeits or gives up the property pledged as collateral, with the lender then becoming the owner of the property.In a typical mortgage loan transaction, which is a type of secured business loan, the real estate being acquired with the help of the loan serves as collateral. When the buyer fails to pay the loan under the mortgage loan agreement, the ownership of the real estate is transferred to the bank. The bank uses the legal process of foreclosure to obtain real estate from a borrower who defaults on a mortgage loan obligation.It is the lenders’ role to look at the business’ history, current situation, its goals, and needs to be able to properly assess the best and reasonable financial assistance that the business needs.Small businesses usually apply for a secured business loan because by extending the loan through securing the debt, the creditor is relieved of most of the financial risks involved because it allows the creditor to take the property in the event that the debt is not properly repaid. Another purpose for getting a secured business loan is because of the possibility that the borrowers may receive loans on more favorable terms than that available for unsecured debt, or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all.The lender may offer a secured business loan with attractive interest rates and repayment periods that is very favorable for the eligible business owner.In general, a secured business loan may attract lower interest rates compared to the unsecured debt due to the added security for the lender; however, credit history, ability to repay, and expected returns for the lender are also factors affecting rates.It is fairly easy to apply for a secured business loan. Many banks accept applications through online or personal transactions. Banks typically feel more comfortable when the borrower is currently a client of the bank, which means they are more likely to approve of the business loan.With the secured business loan, it is more possible that ever for small and medium-sized businesses to take advantage of expansion opportunities, amass seasonal inventory, and engage in lucrative marketing initiatives.

Many people who wish to start their own business or to expand their existing one need an injection of financial capital at the beginning of a business; as we all know, the main source of funding for entrepreneurs is business loans.There are few common mistakes we make while applying for a business loan or during the processing of the loan which can result in a rejected loan application. I will try to present a few of them which will help you understand the what you need to ensure that your next business loan application will not be rejected or why your previous loan application was rejected.Lack of planningBefore applying for a business you need to do some homework and make certain plans about how you are going to approach your lender and how you can ensure that your loan application won’t be rejected.Do some homework — First of all you will have to decide the type of loan you need then do a good research on the lending market and find out which lenders are best suited for you. List them in the order of interest in the market in which you are in. It will help you determine who is most interested in your business and is willing to help you succeed. After you identify the right lender or bank, make it sure that the lender understands your business and what you’re aiming for.DocumentationOnce the planning part is completed the next step involved is collecting or organizing the required documents. This step also needs to be done with a cool headed approach so that you can make sure all the necessary documents are ready.
Keep this on mind that all statements in the application will need to have supporting documents so make sure to gather them all.
The following are some of the documents which you will find necessary.Credit reportA consumer credit report is a factual record of an individual’s credit payment history. Its main purpose is to help a lender quickly and objectively decide whether to grant you credit. If your report shows a mistake, contact the credit reporting agency and demand a correction. An explanation letter should be included with your loan application if your credit report shows legitimate late payments or bankruptcies, this can reduce the negative impact of these black marks on you during the processing of your loan application.A professional looking business proposalIn addition to standard loan documents, a lender expects to see a written proposal when someone applies for a business loan. This is your chance to highlight the most exciting and promising aspects of your business and to prove to your lender that you’re a prime candidate for a loan. The proposal must include a description of your business, the amount of funds requested, it should also include why you are seeking for the funds and the amount that you will contribute. The proposal should tell how you are going to repay the funds. This is what supposed to serve as a basis for your loan application.Tax returns and other financial papersIt is important to be presented with your tax returns and other financial papers from the preceding two years – for both yourself and your business, so make sure you have them all ready before going ahead.Application Form ErrorsThe next step in the process is preparing the application. It should me made sure that no mistakes are there in this vital step. Some of the common mistakes are.Incomplete Application, Inaccurate Statements, Incomplete Financial Disclosure, Unsigned and Undated Application, Illegible Writing, Handwritten loan documents and Lack of supporting documentation for the statements in the application.Interview MistakesOnce you have your application ready the next step will be the interview with the loan officer of the lender. Once the interview starts get ready for the following questions to be shot at you. These questions are common in most of the loan interviews.1. Why do you need the money?2. How much do you need?3. How do you plan to repay it?So prepare yourself to answer them properly and in a way that the lender or the loan officer will finally say “Yes, your loan is approved”.You should be prepared to explain to the loan officer about what are your plans to make the most out of the funds issued, it is also advised carry all those documentations which will make it clear to the lender why it is not risky to approve your loan. Try to convince the banker about how perpetual your business is and your ability to repay the loan.OK now let’s list the common mistakes committed during the interview.1. Obviously, not being prepared enough to answer the above mentioned questions.2. Not maintaining a healthy debt-to-equity ratio — debt-to-equity ratio refers to the amount of money you are borrowing compared to the amount you have invested, if you are not ready invest a good share of the money in your project it can make your project look skeptical.3. Not being prepared for the objections that the lender may raise-Answer all questions honestly and with enough documentation to support whatever statement you make. do not have sufficient information about a concerns raised by the lender just tell him or her that you will provide them the required information soon as it is available to you and l the lender back as soon as you feel that you can provide the required information.4. Showing a low confidence level — Dress professionally for the interview, Make the lender feel like you are an entrepreneur who can and will repay the loan if issued. You may boost the image of your business by providing additional details about your business, this can be done in the form of materials like brochures, articles, press releases, testimonials, awards received etc.5. Not discussing the risk involved in your business — All business has a certain amount of risk involved, and if you don’t discuss it with the officer there is a high probability for him or her to think that you haven’t thought about the risks involved with your business. However it is recommended that you concentrate more on the positive sides than the negative ones while talking to the lender. Tell the lender about the risks involved and explain why chances to meet with the risk are minimal.Other Reasons for rejectionImproper money managementLenders are always impressed with businesses owners that manage their money well. So if you are someone with the following qualities it is difficult to get your loan approved:- Frequent bounced checks- Low bank balance- Frequent overdrafts- Delayed credit card repayments- Have defaulted on previous loans- Sued for non-payment or late payment by suppliersNot asking for feedback from the lender who denied your application previouslyWhenever you meet with denial of a loan application, ask the lender or investor to provide you with some feedback or the reasons why he or she denied it. This can help you in improving those facts before you approach another lender.So, next time you plan to apply for a business loan make sure you plan all the steps in the process carefully and that you are not committing any of these mistakes. If you do so then your application will be processed smoothly and the approved without any delays or objections.

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