Updated: May 7, 2021
Currently, small and medium business owners tend to find financial support services, especially getting loans to looking for more conditions for their businesses to boost business growth. These loans will assist business owners to promptly solve their capital needs. Get a loan can help small businesses access new opportunities and promote competitive advantage in target markets.
However, getting a business loan requires clear and thorough preparation. Issues such as the process of applying for bank loans or finding financial support and success opportunities are something businesses need to pay attention to.
In this article, we will share 4 tips to help small and medium businesses increase their chances of successfully getting business loans.
1. Detailed plan on business loan goals
When making loan procedures, the first and equally important thing is that the company must know the purpose of the loan. According to the needs of the business, all loan purposes should be clearly listed, and the loan purpose such as needing capital to have fixed assets, expand a business, or just solve an income problem should be listed in detail. Purchase raw materials and manufactured goods. Therefore, the company needs to prepare detailed business plans and related documents, a specific growth strategy, or a business development plan that clearly demonstrates the purpose of the business of commercial loans with the bank.
2. A good credit history is a highlight on the loan profile
One of the first things that banks consider is the credibility of the borrower and guarantor or keep track of the history of debt payments. You know, no bank would be willing to lend you large money if the history of your company has been in too large of debt or has slow repayment. Make sure your business has a reliable credit information report that includes all credit transactions of the business, the status of repayment in the last 12 months.
3. Prove the ability of the business to repay debt
When reviewing loan applications, a bank will also look at existing assets to determine if the company has the ability to repay the loan. They consider both asking for more cash flow information to support the company's expenses and its repayment commitment. The stronger the cash inflow, the more a company can pay on time and manage unexpected expenses. This will help build the credibility of the commercial loan approver.
Banks also need to determine the financial status of the business. Always preparing financial reports in a timely manner helps the company avoid emergencies that need to prepare loan documents. Small and medium enterprises can refer to using online accounting tools to optimize the financial reporting process.
4. Take advantage of collateral resources if required
Sources of collateral will help prove to the bank that the business can guarantee the repayment of the loan in any event. Common sources of collateral include real estate or equipment. In addition, goods in stock or unpaid commercial invoices can also be used as collateral.
Using bank loans is an effective option to help SMEs overcome resource constraints and boost business growth. In order to get a successful loan, companies should thoroughly research and prepare their profile. Be sure to comply with the processes and standards required by the bank.
If you, as a business owner, see that you cannot handle accounting on your own, consider hiring an accountancy service for contractors to help you with it.
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