According to the Consumer Financial Protection Bureau, only about 17% of new small businesses are able to secure loans through banks and other lenders when they need one. As a result, over 60% of small businesses are left to use personal or family savings for business purposes.
If your small business is in need of a loan right now, you should try to get one through a business loan provider before doing anything else. You should also try to steer clear of making any of the common business loan application mistakes.
If you make any mistakes during the small business loan application process, it could take you out of the running to get one. Something as simple as a tiny error while filling out loan application paperwork could prove to be crucial.
Here are seven business loan application mistakes you should try your hardest not to make and what you can do to avoid them.
1. Choosing the Wrong Business Loan Provider
When your company is in need of a business loan, you might be tempted to simply Google “business loan provider near me” and select the first option you can find. But this option isn’t always going to be your best choice.
One of the biggest business loan application mistakes you can make is picking a terrible business loan provider. They might not extend business loans with the most favorable terms attached to them.
Rather than blindly choosing a business loan provider and trusting them, you should look high and low for the best option in your specific state. A company with a trusted name like Penn Commercial Capital will do more for you than many other lenders.
2. Applying for the Wrong Types of Business Loans
Not all types of business loans are created equal. It’s why you need to be diligent about doing your research on the kinds of business loans that are available to you. This will ensure that you’re able to select the right type of your situation.
Some of the different types of business loans you can pick from include:
- SBA loans
- Small business loans
- Commercial lending
- Merchant cash advance
- Amazon financing
Applying for the wrong type of loan is another one of the worst business loan application mistakes you can make. You may not meet the business loan eligibility requirements necessary for certain kinds of loans from the start.
3. Asking for Too Much Money When Applying for Business Loans
As you start filling out business loan application paperwork, you’re going to need to decide how much money you would like to ask for. This number should be rooted in research done on your end to satisfy your financial needs.
You should give serious thought to how much money you need since asking for too much could result in your application getting denied.
4. Failing to Disclose What a Business Loan Is For
When you’re applying for a business loan, you’ll normally need to let a lender know more than just how much money you need. You’ll also have to disclose what your business loan is going to be used for in most cases so that a lender can take this into consideration.
If you aren’t open and honest with your intentions for a business loan, it could prevent you from being able to get access to it in the first place. Be prepared to fill a lender in on where the money you borrow is going to be headed so they can account for this while mulling over whether to provide you with a loan.
5. Applying for a Business Loan With a Low Credit Score
If you have a small business that’s still on the newer side, it might not have a business credit score. In this case, your personal credit score will play a big part in your ability to qualify for a business loan.
If, on the other hand, your business has been around for a bit now, it should have a business credit score. You should find out what it is prior to applying for business loans.
If your personal or business credit score isn’t high enough, that alone could disqualify you from securing a business loan. It would be well worth seeing where your credit score stands in advance so that you don’t waste any time applying for a loan that might not be in the cards for you.
6. Filling Out a Business Loan Application Too Quickly
Far too often, business owners wait until the last minute to apply for loans. This can lead to them filling out a business loan application too fast and making critical mistakes while doing it.
You should, first and foremost, think about applying for a business loan on the earlier side when you know you might need one. You’ll be able to avoid backing yourself into a corner by doing this.
You should also go through each and every section of a business loan application to make sure everything is accurate. This will help prevent one or two small mistakes from dooming your application.
7. Neglecting to Send Financial Records to a Business Loan Provider
Any decent business loan provider will ask you to provide them with financial records that lay out your income and expenses. They’ll play a big role in whether or not you get approved for a business loan.
Be sure to keep accurate financial records at all times. You should also have these financial records ready to go so that you can send them to a business loan provider right away when they request them.
Don’t Make These Business Loan Application Mistakes
Would your company benefit from taking out a business loan? Penn Commercial Capital is here to help all those companies that could use a business loan right now.
We can provide your company with a wide range of different types of business loans. We can also make applying for a business loan simple so that you won’t have to stress out too much about making any business loan application mistakes.
Contact us today to get more information on the business loans we offer.