3 Mistakes to Avoid When Getting a Business Loan

When you’re starting a business, it can be difficult to obtain startup funding from banks and other traditional sources of capital. This is where small business loans come in to play; they allow you to start your business without owing anyone an exorbitant amount of money up front. If you are trying to expand your business, you may want to consider obtaining a business loan. However, simply getting the money isn’t enough – you must choose the right type of loan and get the best terms available to help ensure that your business will thrive after the funds are received.

Getting the money, you need to start or grow your business can be an arduous process, especially if you’re starting from scratch without business credit or collateral to back you up. Fortunately, there are several options available to help you get access to the capital your business needs, including unsecured small business loan at apickle.com.au and financing from private investors and banks. However, there are some common mistakes people make when applying for any kind of loan that could derail your entire application before it even gets off the ground, so it’s important to keep them in mind as you prepare your pitch and paperwork.

1) Not applying at all

Many entrepreneurs fail to realize the critical role that access to credit plays in establishing their business. If you’re thinking about starting your own business, not applying for any kind of financial assistance is the first mistake you’ll want to avoid.

Not finding out how much financing you qualify for. You may have looked into the loans available and come up with an estimate of how much money you could afford as well as some ideas about how that money could be spent but it’s important not just to take a stab in the dark and hope for the best.

2) Not having good collateral

When lenders are looking at you for a business loan, they will want good collateral. Collateral is the assets that the lender can seize if the borrower does not pay back their debt. For example, if your business needs $50,000 and you don’t have any good collateral for a bank or SBA loan, then it’s going to be difficult for them to take your $250 iPhone as collateral. On the other hand, if you were able to offer up say…a rental property with an apartment building as your collateral, then this may work in your favor. The bank would rather seize an asset worth several hundred thousand dollars than risk not getting anything out of your small investment company that employs only 5 people.

3) Poor credit history

If you have poor credit history, you are often classified as having a higher risk for defaults. As such, many banks may be hesitant to lend money to you for fear that the probability of repayment is lower. This makes it difficult if not impossible for entrepreneurs with bad credit scores to get business loans from banks and similar institutions. One way around this obstacle is through crowdfunding platforms that act as intermediaries between borrowers and lenders. Most of these platforms ask entrepreneurs only one question: What do you need? or What will the loan be used for?