Here are some tips that are going to help in increasing your chances of getting a bank loan, and it includes advice on communicating with financial officials and what you can do before the loan meeting so that you can succeed with the application.
1. Begin with a personal credit rating evaluation
This is an important thing to do because it can spell doom from the moment you step into the loan meeting. Many lenders will start by looking at your personal credit history alongside that of your business when looking at your application. If you currently have a loan in your name that you are defaulting, then it is important to pay it off in full because it is going to improve your chances of getting the loan. If you have been paying your loans late, you need to start paying on time because it has an impact on your credit rating.
You can use Experian or Equifax to get your credit history. Once you know your credit history, you will start looking for ways of improving it. Your credit history has a big impact on whether the loan is approved or not. Once you know your credit history, you will have the chance of working on it.
2. Improving your credit rating
While some company directors will not have to do this to increase the chances of getting the loan, it is a good idea to work on your credit rating if you have a poor credit rating. Many experts advise people with poor ratings to wait for 12 months and use the time to improve their credit rating because banks will always reject loan applications from individuals with poor credit history. When an application fails, it hurts the credit rating of the applicant, and this makes it even harder for you to get a loan. Some banks are offering a product known as credit builder card, and its sole purpose is to help people restore their credibility by improving their credit rating. With such a product, you will be able to improve your credit score.
3. Giving them the worst-case scenario and the expected outcome
This can be a great way of improving your chances of getting a loan. It improves your chances because banks want to be confident that you will be able to pay back the loan even during difficult times. You should try providing them with documents showing how your profits and sales are going to hold up if you fall short of your forecast by 5-10%, or how your financial situation would be if the interest rates increased. You should have a close look at your cash flow forecast so you can see if the assumptions that you are making are right. A banker will be impressed when they see three or four spreadsheets looking at different cash flow forecasts suggest the experts at Credit21 a licensed moneylender in Singapore. Before lending businesses money, many lenders will want to know if they will be able to make their loan payments including the interests during stressed situations.
4. Memorizing figures and proceeding with confidence
The bank manager is not going to be impressed when you don’t know the answer to questions about the profit margins, turnover, and cash flow forecast of your business, making it important to prepare and answer these questions sharply and concisely. During the meeting, exude confidence because it adds some credibility to your application. Invest time in preparing for the meeting because it increases your chances of getting the loan.
5. Consider appealing
This approach might not be the best for everyone, but there are some rejections that have been overturned after following the banking appeal procedures. This is because different individuals from the same banks can look at the application differently. Since 2011, the appeal procedure has been around, and 40% of rejections have ended up being overturned, and this resulted in small businesses acquiring millions in finance. If your application has been dismissed and you believed it wasn’t fair, then you can choose to appeal it. You might end up getting a second chance. When you file for an appeal, it is going to be reviewed by different people in the same bank. They will look at your application independently and see whether there is another way to do it. Once they have more information, they quite often find a different way.
6. Applying to a different bank if the application was rejected for reasons not relating to poor credit history
If your loan application is rejected by your current bank, consider looking at other banks and applying for a loan. Banks are not the same. Some may be more prepared to lend you when others are not. Some banks will prefer businesses in certain industries.
7. Considering alternative finance
If you try to acquire funding from traditional lenders such as banks but fail, do not worry because there are other options. There are several lending platforms out there ready to give you a loan. One good example is peer-to-peer lending sites. Give such lending options a try and see whether you can get funding from people who have registered for saving purposes. Another option that has gained popularity over the years is Crowdfunding. Many businesses have been able to obtain finance through crowdfunding. You can even decide to have a closed-door fundraiser where you invite investors that you have made a presentation to because you can end up getting backing from them. If you try all this and fail, then see if your business can get invoice factoring. This is a method that is being used frequently by businesses to help with their financial situation in the short-term.