For any business startup, a certain amount is invested as capital to run and maintain the business. A lot of businesses are sustained in the market by loans. Loans are very good when it comes to business profits.
Many businesses are applying for loans but their requests are declined due to some reasons, today we are looking at how to qualify for any business loan. By the end of this article, you will have gained knowledge on practices to boost and qualify for business loans.
CAN I GET ANY BUSINESS LOAN?
Yes, any serious investor looking forward to starting a business qualifies for a loan.
what will make me qualify for any business loan?
To qualify for any business loan, you will need the following.
- Personal and business credit score
- Time in business
- Business plan
- Necessary loan documents
- Collateral for secured loans.
IN DETAILS:
1. PERSONAL AND BUSINESS CREDIT SCORE.
Your credit score is the first thing your lender will go for. Keeping a good credit score I a key factor and practice to qualify for loans. Repaying the loan in the agreed time and full amounts will help to boost your credit score.
Your credit score will also determine whether you are capable of repaying the loan. Lenders will not involve themselves in giving out credits to borrowers with poor credit scores. Instead, they go for borrowers with high credit scores. Make sure to have a very good credit score before going for any kind of business loan.
2. TIME IN BUSINESS.
Many small businesses fail to function within the first 10 months of operation, posing a very big risk to lenders. All lenders will be comfortable lending to a business that has been in operation for more than 1.5 years. The time that your business has been in operation will greatly determine the credit you qualify for.
The longer the business has been in operation the higher the credit amount. Lenders will be confident with your business operation time hence this will make it easy to qualify for a business loan. Lenders will look for how long has your business had an open bank account, not how long since the business was registered.
3. BUSINESS PLAN.
Any serious investor will always have a business plan. Even before you start up a business, a business plan has to be ready. Some lenders will require your business plan especially if it is a start-up loan. Lenders will use your business plan to determine whether:
- Your business is viable
- Your business is capable of repaying the loan
If your business plan does not have projections of making profits or some pieces are missing, then you will not qualify for any loan. See more about the business plan here.
4. NECESSARY LOAN DOCUMENTS.
When applying for a business loan, make sure to have the following documentation:
- National identification document
- Registered business license and permits
- Passports
- Bank statements
- Financial statements
- Business plan
- Tax compliance certificate
- Annual tax returns
Lenders may require more than the mentioned documents depending on the lender’s terms and conditions for application. In many cases, these are the most required documents for a business loan application.
5. COLLATERAL FOR SECURED LOANS.
In cases where the loan amount is huge, the loan has to be secured due to high risks. In this case, you have to provide an asset that will cover the loan as security. Here are some examples of loan security:
- Title deeds
- Motor vehicle log books
- Unpaid invoices
- Equipment’s
- Machinery
- Debentures on assets
If the loan is meant to purchase assets, the assets can be used as collateral for security. If the loan defaults, the lender will sell off the assets and recover their money. It is also possible to provide personal items as collateral, but not all lenders will accept them.
Conclusion
In a nutshell, a business loan will greatly help you to grow and expand your business profits. Successful investors will not tell you that their businesses are thriving through loan money. Grow your loan limits by making sure to set a good credit score. With a clean record, everyone with a good business can qualify for loans. https://kenyansp.co.ke/2023/03/09/top-5-websites-to-make-money-from/
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