Finance & Loans–A few businesses have enough capital but many still grapple with the idea of borrowing extra funding.
The owners try visiting loaning institutions like banks but still get rejected on account of lack of credibility or credit worthiness.
Below is a lit of a few things a business owner should improve on before thinking of walking into a banking hall for a loan
Improving conditions: Conditions are typically outside of the lender and borrower’s control. The borrower must have a solid reason to request the loan and a strong enough credit profile to fit the lender’s lending criteria. It helps.
Improving character: Character is absolutely important. Some ways to improve your character rating include paying bills early or on time that are reported to credit bureaus (e.g., credit cards and lines of credit), having a higher age of credit, diversifying your credit portfolio with a mix of revolving and installment credit and getting adverse events (like late payments) removed or closed. By calling the number provided, you can verify that your credit lenders report to the credit bureaus. Some lenders, primarily net 30-90 vendors, may not report until you request it.
Improving capital: Capital is tougher to control by the business if the business is struggling to generate revenue. It is recommended that the business begins to save as much as possible in preparing a credit request to ensure the debt-to-income ratio will be 36% or lower. Some lenders will lend credit at a higher interest rate, up to 50% DTI.
Improving collateral: Collateral is another challenge to control, primarily digital businesses, because the collateral, in most cases, must be liquid and owned outright. One way to improve the strength of collateral is by entering into a secured loan agreement leveraging additional assets that are equal to or higher than the loan amount.
It goes without saying, building relationships with lenders helps to strengthen the chances of being approved for a loan. Still, the most important attributes to consider are DTI, the reason for the loan and the business outlook. You should consult your financial advisor or accountant before pursuing a loan.
