Ways to boost your chances of being approved for a business loan
It can be an incredibly stressful and frustrating time when you try to get approved for a business loan. You will have to fill out lengthy application forms that ask for all sorts of information, and afterall your hard work you can still end up not being approved. It isn’t fun, and it can happen to anyone -even established companies sometimes fail to get approval
As many as 58% of businesses are unable to land a loan from the big banks. This stops their progress towards their goals. Data from Lending Express shows that of 58% of businesses unable to get approval from the big banks, around 14% of them are right at the borderline of qualifying. So with small business loan approval rates at just 48%, it’s no surprise that so many consider trying alternative lending. However, there are some things you can do to try and improve your chances of getting approved, and it’s best to know all your options before making a decision.
- Check your credit before the lender does
- Online eligibility checkers: pick your lender carefully
- Clean up your business and personal credit score
- Have a ‘healthy’ business
- Been rejected? Maybe you need to try alternative lending
Check your credit before the lender does
It’s essential that you know what your credit score is – how else will you be able to assess your eligibility for a loan? Get a full credit report, and check it over meticulously. If there are any errors on your credit report, you will need to dispute them and get those errors corrected before applying for loans of any kind. The process of getting errors corrected can take time, so get started on this as quickly as possible to minimise any delays that it may cause.
Online eligibility checkers: pick your lender carefully
When searching for how to get approved for a small business loan, you will run into hundreds of different lenders and financing products for SMEs. Looking through all of them can quickly become overwhelming. You could go through the painstaking process of examining all the different lenders and products, figuring out the ones you may qualify for then applying (and potentially going through numerous credit checks as you do). Alternatively, you could use an online eligibility checker that does some of the hard work for you.
We offer a ‘Quick Quote’ tool that can give you a good idea of how much you could borrow based on your current circumstances. Furthermore, many credit reference agencies have the facility to show you loans that you or your business might be eligible for. Make use of tools like these to help you get an idea of your options before committing to hard credit checks and complex loan applications. Remember, not all lenders will fancy you, but that doesn’t mean none will – find efficient ways to pinpoint those with the most potential. To minimise the headaches with the forms, make sure you get all your paperwork together before you start filling out the application. This means identification documents, statements, and anything else that an application requires you provide.
Clean up your business and personal credit score
Credit scores play a pivotal role in whether or not you qualify for a loan; there is no way around it. Credit scores are made up of the most influential factors that lenders consider when assessing your eligibility for a business loan. If your business is quite young, it won’t have had much opportunity to establish its credit score, so lenders will probably turn their attention to your personal credit.
It is your ability to pay up in a timely manner that will either draw or deflect the lenders, so be sure to have automated payments set up to ensure you never miss any. If possible, get caught up and pay off any existing debts in order to improve the ratio between what you owe and your existing credit limits (known as your utilisation rate). It takes commitment and patience to build a good credit score. If you lack the time to make significant improvements to it, there are other options.
One such option is to focus on your credit mix. Having experience with a range of credit types is actually a positive in the eyes of the lender. This is because it shows you have experience juggling a range of finance types. That said, don’t open accounts just for the sake of it, as this can backfire in the long run. Only take on loans that you need, and that you can afford, or your financial troubles
could pile up.
Have a ‘healthy’ business
One of the biggest challenges in business is getting yours to thrive, not just run. Lenders will be interested in things like your gross monthly revenue and overall health – even things like whether you and your business pay the rent on time will be a factor. The more stable your cash flow, the less risk lenders will see in approving your application.
There are hundreds of ways you can keep your gross monthly revenue high, but it is a real art making it work. You can focus on growing your customer base, encouraging customer loyalty or even raising your prices (within reason). Having high revenue is much easier said than done, but if your business looks healthy then your chances of success with a business loan approval will be higher.
Been rejected? Maybe you need to try alternative lending
If you really are struggling to get a business loan from the banks, then alternative lending may be the best option for you. This encompasses the small business loan options available that fall outside of traditional banking. They are easier to get approved for, and many even offer small business loans online approval. There are often a range of more creative financing solutions available, but you will need to do your homework to ensure you make the right decisions.
The question "Are small business loans easy to get?" is a common one among young SMEs. The reality is that getting approval for a business loan is challenging. It’s essential that you do all that you can to prepare before submitting any applications. By following the suggestions in this article, you can boost your chances of getting approved. You don't want too many credit checks on your history, so do all you can to improve your chances before committing.
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