Have you applied for a small-business loan and been rejected? This is nothing to get too stressed about – it happens from time to time. However, it’s important to be aware that too many rejected loan applications can have a harmful impact on your credit score, which will make it increasingly harder to secure a loan. To avoid this, we’ve compiled a list of our top five ways to improve your business loans applications for the best possible chance at being approved.
1. Check your credit report
Did you know that credit scores and credit reports are two different things? A credit score is a single number that tells you whether your credit standing is favourable or not; a credit report, on the other hand, is a full summary of every loan, line of credit, and credit card that is in your name. It includes remaining balances and repayment history. Your credit report can give you a deeper understanding of your credit score: why it’s so high or so low, how it can be improved, and the exact reasons why your last loan application might have been rejected. You can access your credit report for free through a trusted credit reporting agency.
2. Pay off as many debts as possible
Lenders want to see that you have a history of paying off loans and debts without trouble. If you have existing loan repayments or debts that you can feasibly pay off, this is the time to do it. Just make sure you’re not paying more than you can afford to. Prioritise your debts by importance: mortgage or rent should come first, followed by council rates and body corporate fees, energy and water bills, and then car repayments. Not only will this make your next loan application more likely to be approved, it will also reduce your debts and save you money on interest – it’s a win-win situation.
3. Put in safety net in place
Trying to quickly pay off loans and debts before applying for a new loan isn’t feasible for many business owners. If it’s not realistic for you to do that, organise a financial safety net instead. As a rule of thumb, a cash safety net should be at least three months’ worth of typical expenses that you can rely on if you find yourself falling behind on debt and loan repayments. Lenders like to see that you have a plan in place that will allow you to securely manage loan repayments.
4. Prepare all your documentation
You will need to be able to back up any information you put on your loan application with tangible proof. Before you submit your application, gather all of the information and documentation you might need. This typically includes personal identification documents, tax portal reports and financial statements for your business. If you’re unsure about what documents you may need to provide, it doesn’t hurt to contact your lender and ask.
5. Ask for help if you need it
Never shy away from asking a professional for advice or assistance – after all, they know best what a lender wants to see on an application. They can offer advice and help you make a great plan for a successful application. Here at Zip , we have an extensive network of financial brokers and advisors who can assist you in putting together the best possible loan application.
Whether you’re trying to get your small business off the ground or you just need a little financial assistance, Zip Co can help you. On top of our buy now, pay later service, we offer fantastic small business loans. Contact us to apply today.