7 Common Small Business Loan Application Mistakes That Can Hinder Your Success
Whether you need to launch, expand, or maintain a business, a small business loan can be a vital resource. However, the application process can feel overwhelming, and mistakes can hinder your chances of approval.
Let’s look at some common mistakes to avoid when applying for a small business loan:
Opportunity #1 Sticking to Conventional Options
Applying for a small business loan directly from a bank can be challenging. The paperwork isn’t always easy to understand, and the processing time can be lengthy. Instead, consider getting additional funding for your company by applying through Levr.ai.
This intelligent small business loans platform uses cutting-edge technology to connect applicants with the right certified lenders for their needs. Moreover, it features chat support, templates, and document guides to help you with the process.
Opportunity #2 Lack of Preparation and Documentation
Before submitting your application, take the time to gather all the necessary paperwork and information. Documents can include financial statements, tax returns, business plans, and more. A well-prepared application will impress lenders and show them that you are serious about your business.
Opportunity #3 Inaccurate Financial Information
Lenders rely on financial statements to assess the financial health of your business and determine your ability to repay the loan. Ensure that your financial statements are accurate, up-to-date, and in line with generally accepted accounting principles. Any inconsistencies may raise red flags.
Opportunity #4 Poor Credit Score
If you have a limited credit history or a poor credit score, it can be challenging to secure a loan with favourable terms. That’s why it’s a good idea to build your credit history and improve your score before applying for a small business loan. Paying bills on time, reducing debt, and keeping credit card balances low are all ways to improve your creditworthiness.
Of course, not all business loans require good credit. Your business may qualify for a merchant cash advance (MCA), equipment loan, or invoice factoring loan even if it lacks credit history.
Opportunity #5 Wrong Loan Amount
While it may seem tempting, it’s best to avoid applying for more than you need. Here are a few reasons why:
- Larger loans may be more challenging to qualify for.
- You may have to pay higher interest rates than you need to.
- A smaller loan can help your business build credit.
Opportunity #6 Inadequate Business Plan
Lenders want to see that you have a clear vision for your business. They also need to feel confident that you can repay the loan. This is where a comprehensive business plan can help. Depending on the type of application, your business plan may need to outline your target market, competitive advantage, revenue projections, and marketing strategies.
Opportunity #7 Wrong Type of Loan
There are various types of loans available, including term loans, lines of credit, and SBA loans. Each loan type has its own requirements and terms. Please research and understand the options available to pick the best one for your business.
Increase Your Chances of Approval
By avoiding common mistakes, preparing a comprehensive application, and researching your options, you can increase your chances of approval. Remember to be diligent, thorough, and proactive throughout the process. Don’t hesitate to seek professional guidance if you need to.
