Bank lending has been really tight in the last few years. Most business owners now think the only word their banker can say is “no.”

Reason: This past financial crisis has changed the lending game. Banks and other lenders won’t give you a business loan just because you have a nice smile or a fresh idea. You have to go out there, roll up your sleeves and really entice them to lend you your business – they have to approve you.

Know that when lenders start approving more loans again, the flow of new business loan applications will actually increase. Thus, in order to ensure that your loan application is funded, you need to find ways to make your business stand out – not only making it stand out but stand above everyone else.

Here are some tips to take your business loan application on top:

Choose the right bank or lender: Not all lenders will come out of this financial mess in the same state that they entered. Some may have changed their entire philosophy of lending. Some will no longer make loans to small or medium-sized businesses – focusing only on top-tier/low-risk companies. Some will only provide loans based on companies in certain industries or with specific collateral. And, some businesses may be out of the lending arena altogether. So, start with your current bank or previous lender and see if they have changed regarding their business loan policies.

Also, all the banks and lenders have changed their loan approval criteria. This was not done to prevent businesses from seeking loans but over the threat of new government regulations. Thus, if your business was able to obtain a business loan or working capital line of credit before the financial downturn – that doesn’t mean it will qualify for one with the same bank or lender today or even tomorrow.

Collateral and Guarantees: Banks are now focusing more on repayment and there is not just one type of repayment but several types. Banks and other lenders always look at existing positive cash flow as the first source of repayment. But, now this is not enough. What if you have a slow month or if the economy tanks again? Lenders will begin to seek additional (supplementary) forms of repayment from sources such as personal guarantees or large amounts and/or highly valued collateral.

Collateral will be important in this new lending market. If you are serious about the future prospects of your business, then you should have no problem submitting collateral for business loan requests. Collateral not only provides your lender with an additional source of repayment but can actually show your banker or loan officer that your business is serious – essentially helping you close the deal.

Keep in mind that different collateral has different values. Banks and other lenders don’t look at how much you paid for a piece of equipment or property. They judge its value by how fast they can sell it at the selling price to recoup their losses.

The best collateral – where your business will get the best value for the loan – is collateral that has high liquidity – such as accounts receivables, investments, purchase orders, or even the personal liquid assets of the business owner or management team.

Make sure your business loan application clearly states what collateral and/or guarantees you or your business is willing to provide, as well as its current, conservative market value. Providing this information upfront will demonstrate to your lender that you are not here to fight them on this highly contentious issue but are willing to play within their rules. Plus, banks love easy deals, and deals with tons of collateral are usually the easiest to get approved.

Remember, if you do not show and will not demonstrate that you are serious about your business and have not taken the time to understand your lender’s collateral or guarantee policy, your banker or lender will treat you the same way. Will do that and forward your application to the bottom drawer or corner round file.

A Clear Story: Make sure your loan application tells your story. Not only what your company does but also what it does, who it targets and satisfies (your customer segment), and how its current management can create value in the future (based on what it has done in the past). what has been done in the project) and whether the funds will be used for Saying in your business loan application that you will use those funds for general business purposes doesn’t fly anymore. The bank and other lenders must be repaid and satisfied that you and your business can manage this new claim (debt funding) in such a way as to pay off the loan and interest as well as generate enough new revenue to grow your company. ) will be deployed.

Financial Statements and Tax Returns: Bankers and lenders will not only listen to you for your financial standing or be satisfied with a quick printout from your accounting program. Declared Income Credit is a thing of the past. Lenders will be looking for at least 3 to 5 years of audited financial statements and/or both completed and filed tax returns. These financial statements not only provide your lenders with additional information to help them make their decisions but can actually validate the potential of your business; Both of these will further your ability to get the desired approvals.

In addition, many lenders today will contact both your customers and suppliers to back up some of the information you provide on your financial statements. While this may sound like a huge hassle – it’s just the way the game is played. If you go into the process knowing what financial documentation is required and planning for it (including taking your customers and suppliers in advance) the burden on both you and your loan officer will be reduced.

Forecast: Your loan application should include a well-crafted financial forecast, combined with financial statements and tax returns. This will not only show the strength of your management’s ability to guide the company going forward, but forecasting (if done properly with best-case, worst-case, and most likely-case scenarios) will allow your lender to determine whether can help ensure that your business will still be able to repay your loan under various market conditions. In addition, these forecasts should show the most likely scenarios, both with and without loan income.

As always, tie your forecast to your expected loan term and make sure all the numbers line up with past results – if not, make sure you have a detailed explanation of why.

Network: Lastly, do your homework on who your bank or lender has worked with in the past. Most banks or finance companies have their core customers – businesses who can just pick up the phone and get what they want. If your business can get references or introductions from them – it is likely to put you over the top and get potential lenders knocking on your door.

If this isn’t possible, look to people you’ve dealt with in the past (such as other lenders or suppliers) or who provide your business with revenue (such as customers) for references. These groups will show your lender that they will continue to support your business in the future – making you a better candidate for a business loan.

The bottom line here is that if your business really needs outside capital to grow, make sure you apply the same intensity to your business loan application as you do to your business. Walking into your bank and asking for a business loan is quite different from walking into your butcher and asking about the day’s cut.

Not getting what you want from your butcher can frustrate you but not getting what you want from your banker or lender can destroy you.

As we are emerging in this new economy, as a business owner, you must understand that business lending has changed, and if your business needs outside capital to thrive and grow, you must ensure that you have a well-prepared business loan application before being considered. Walk into your lender’s office.

How to Improve Chances Of Getting A Business Loan

Are you running low on funds and feeling that you need a business loan? Many people feel pressured to throw together a loan package quickly. These are three recognizable and proven ways to improve your chances of getting a business loan.

Apply for a business loan with the name of your business instead of your given name: For example, on your business loan, use “Sarah’s Block Company” versus your given name — “Sarah Smart.” The reason you apply for a business loan in the name of your business is that it is a business loan – not a personal loan. Banks and lending institutions are more than happy to help your business with a business loan, but they shy away from extending a business loan to an individual. Having a business that is a corporation or LLC improves your success rate – for example, an S-corp, C-corp, or LLC.

Sole Proprietor Business owners have difficulty obtaining business loans because they lack the same credibility of being recognized as a ‘business’ that goes with a business formed as a corporation – a business that is bound by by bylaws. , complete with a tax ID number and business bank account. A business portrays the ‘image’ of success better than an individual.

This is because lending institutions work better for those business people. As a sole proprietor, a person ‘seems’ to be in their own self-interest as an individual rather than a business. Sole Proprietorship loans are evaluated on personal credit history and not a separate business history to the credit reporting agencies. This does not go down well with lending institutions.

Even corporations can mix personal and business loans. It is an easy trap to fall into. Let’s say you own a construction company and you get a construction loan to develop a piece of property but use that money to repair your private home. While there are many ways to justify this, the financial company will not see it that way. There won’t even be an IRS agent at tax time. And there’s a double penalty for doing so – the IRS may choose to ‘disallow’ all of your business expenses if you’ve been audited and mixed up your expenses. You can quickly see that this can become the stuff people describe as, “the stuff that hits the fan.”

There are countless examples of mixing business with personal expenses – let’s say you get a business loan for a business computer, but you have some extra cash from the loan. You may find yourself thinking that you can get that new computer for the kids with the extra money – poor choice.

On the other side of a business loan is a credit card in the name of your business. If you treat credit cards the same way you treat business loans, you’ll experience the same results.

The other thing that can happen from this is that you are now running the risk of damaging your personal credit score. This low credit score affects all things with the passage of time. When you really need a business loan – at a later date – you may not qualify.

Credit scores are a fickle bunch. They depend heavily on past performance, past and current balances, and how close your balance is to your credit card limit (for example, do you have a credit limit of $500, and have you used that credit limit? The card has been charged $480? Persistently? This means you’re ‘always’ in debt over 90 percent of your credit card limit).

At that rate, your business loan approval rating drops to nearly zero, with some more than 50% of your total “available” balance listed on your credit history. Available Balance means the total balance you are listed as using – for example, your balance is $250.00, but you have an available balance of $500.00, so (in theory) you can withdraw up to $500.00 can charge.

Don’t – Never charge your credit card balance more than half of the total balance available to you. Even $1.00 will make a difference to your credit score (a negative one).

Another thing you might not know about a credit score is this: If you want to get the best deal on a car or any other item and you use a ‘credit broker’ to help you. A credit broker’s job is to take your personal and business identity and shop with your credit for the best deals you can get. Since your credit is ‘hit’ with each inquiry from individual ‘dealers’, your credit score goes down an average of 2-4 points per inquiry, per credit bureau.

This means that if you went car shopping and your credit broker found 40 different credit purchase ‘deals’ for you, your overall credit score would drop by about 80-160 total points per credit reporting agency. If you were marginally good credit before – now your credit stinks. Plus, as your credit score moves downward, so does the interest rate you qualify for – wow! It is a game for them. It stinks for you.

The end result of all this is that you are now ready to avail of a business loan. As the owner – or principal – of your business, your banker needs your personal credit score to decide whether you are a good credit risk for their business loan. In order to qualify for that business loan with any success, you need to have a good score. This is a great thing to remember when you’re starting a business. What matters is how you protect yourself.

Receive multiple business loan applications from multiple lending institutions – not just one. Imagine this is your business: You are a corporation with a clean credit record. You are new to the business and have not yet applied for a loan in the name of your business, so you do not have any business history in loan repayment in terms of business bank loans. Your company is expanding and you need to take it to the next level. You need some additional staff and some specialized equipment to manufacture and produce your product for the additional customers you add to your lists.

Where in the world will you go to ask for that money? You do not have any credit history.

Don’t let a lack of business credit history stand in your way. Go ahead and find out what you need to move forward and ask for several small business loans instead of one large business loan. Using this method increases your chances of business loan approval dramatically and you’ll get the experience of building a credit history for the same cost as one large loan for everything else.

You may be better off applying for an unsecured line of credit that is based on your declared income versus a full-blown loan application process. Sometimes it’s important whether or not you get the money you need and the approval you want. These lines of credit are not only easier to obtain because they offer fewer restrictions, but they give you a business history the next time you need to expand and grow your business.

Also, you can use up to half of any credit card balance available with you as an unsecured loan to get through that expansion phase. Take into account credit card interest rates, late payment penalties, and other factors that can hurt your credit. Plan for the worst and have a backup for that or it will come back to haunt you.