Business finance is fundamental to getting any business up and running. As the saying goes: “You have to spend money to make money.” But if you don’t have money to spend on setting up or upgrading your business, then it will stagnate and die.
Thankfully, there are plenty of lenders out there who might be willing to loan you what you need to get the ball rolling. However, you might have already tried applying for a business loan and have been rejected.
Let’s take a look at some of the reasons why this might have happened so you can avoid those pitfalls next time.
One of the biggest problems businesses have when applying for financing is that their cash flow is insufficient for the lender to feel assured that the loan instalment terms can be met.
This is really an issue of affordability. If you can’t repay the loan, then perhaps you should consider a smaller loan or have a financial advisor help you figure out how to optimise your cash flow so that you can afford the loan you want.
Ultimately, it comes down to planning and timing.
Bad credit history could be getting in the way of securing a business loan. Lenders rely on credit histories to determine the reliability of a borrower to repay the instalments consistently.
Lenders make money off the interest, but they can only do that with reliable debtors.
If you have a low credit rating, there are ways you could improve it, such as taking out small amounts of credit and being faithful with instalment repayments – this will take time though.
Unfortunately, when it comes to entrepreneurs and startups, you will probably have to personally guarantee the loan, so there’s no real way to avoid a credit check.
Just because you believe in your business doesn’t mean anyone else will ‒ especially lenders who want to make sure they get their money back.
If you have a new business and you need unsecured business financing, then you need to have a fantastic business plan to show, in black and white, how exactly you plan on earning enough money to repay the loan and continue making a profit.
For help securing business finance and other loans, contact ZEP Finance today and see what we can do for you!