Effective Ways To Improve Your Startup Loan Approval Rates
Finance is the biggest concern for any budding entrepreneur who is willing to start up. No matter, how creative and unique your startup idea is, without proper funding, it is almost impossible to take your startup to the next level in today’s competitive world.
However, many financial institutions are getting aware of the startup boom and are offering various different kind of small business startup loans in order to promote new ventures. Although, there are multiple sources available today for startup business loans for entrepreneurs, it doesn’t mean it’s easy to get a loan approval.
Not all startup ideas can impress the Angel Investors or Venture Capitalists but there are chances that banks, both big and small, could offer a business loan as all they look for is the potential of the business and the capability of repayment with interest.
Hence, so many banks are offering tailor-made loan options for budding entrepreneurs and startups in order to take their dream ventures to the next level. However, these banks are quite choosy and strict when it comes to avail loans as the main criteria for them is the capability of repayment of the loan with interest. Almost 80% of loan applications get rejected by these financial institutions, which is why, you should be well prepared beforehand in order to improve your chances of getting a loan approval at these sources.
How To Get Startup Loan Approval From Any Bank?
Here are a few tricks that you must follow in order to improve your stakes for small business startup loan approval:
Dress professionally to gain confidence:
The startup industry is kind of different that traditional corporate industry where most of the entrepreneurs are computer geeks and believe in casual lifestyle rather than the executive approach. However, such an approach would never leave a good impression on your would-be lenders. Remember the principle of first impression works with banks and financial institutions as well. So, dress yourself as if you are going for a job interview and try to look professional in order to gain the confidence of the lending officer.
Carry all the necessary documents to visualize your future goals and prospects:
Dressing properly would give you an upper hand, but it won’t be enough to secure the loan. Banks should be aware about how you are going to use the finance. Hence, carry all the necessary documents, along with the loan application, which displays the cash flow as well as your financial statement projects for the next three years. You may need a professional accountant’s assistance to prepare these papers. Also, don’t forget to include a cover letter in order to add more advantage to your loan application
Be brave and ask for it:
Many entrepreneurs ignore banks or financial institutions for startup loans as they are skeptical about the approval rates. You must understand the fact that banks were established to lend money as well and not just keep it. Simply write an application and apply for a startup loan without worrying about rejections. Try to locate a bank that is aware of your industry and have already funded similar businesses like yours. Most banks show interest in funding startups, but they would need some sort of collateral against a new venture in order to keep them secured if the startup doesn’t rise well as promised.
Prepare yourself for many questions:
Try to don the role of a lending officer and prepare a list of questions that may be asked while startup loan processing. You can always practice answering these questions with your friend or business partner in order to gain confidence before the real interview. Such preparations would not only offer confidence, but also let you gear up with perfect answers for different set of questions generally asked by the loan officer.
Honesty is the best policy:
Many entrepreneurs try to escalate their financial assets and income in order to secure a higher loan. Such tactics won’t work with the banks as they have their own personal credit investigators who will check each and every financial detail you submit during the loan application. Your loan application would be rejected at the very instant if they find any suspicious activity or flaw in your cash flow or financial projections. So, be honest about your finance and assure them how you will be repaying the loan within the tenure.
Talk openly about the risks involved and your action plan to counter them:
Just because you don’t talk or discuss about the risks involved in your startup venture, it doesn’t mean that there are no risks at all. Loan officers go through so many loan applications on a daily basis and are well aware of the industry and the risks involved with any business. Instead of ignoring the risks, try to discuss about them and your plans to manage them. Such a well prepared outlook would gain the trust of the loan officer as well as improve your loan approval rate.
You may face rejections and don’t give up:
Remember, failure is one of the climbing steps towards success. Don’t get disheartened because of rejections as the chances of getting a loan approved in the first instance is too minute. Prepare a list of multiple banks rather than focusing on a single financial institution for your startup loan. Banks will take months to decide whether to approve or reject your loan application. Utilize this time and apply in multiple banks in order to improve your probability at loan approval. Remember, the more banks you apply, the more confident you will become during the interview.
You must realize the fact that banks make money from their loan products. Hence, they are always keen to lend money, whether for a large enterprise or a new startup. However, they look for any guarantee or security that would assure that your company will repay the loan in time.
You can improve your chances of loan approval if you have a history of borrowing and repaying at least one loan on time as it signifies your financial track record. Having a collateral or some sort of financial assets that can be used as guarantee could also very well help with loan approval. Remember, if you show promise, irrespective of the fact that its a low-profit, low-risk enterprise, banks will prefer your loan application rather than lending to a high-risk ventures with no profit records.
So, what are you waiting for? Fill in your application form and apply for a small business startup loan today.