Convincing a bank or any other financial institution to give a loan with favorable terms is a huge challenge. This is because most banks have a negative attitude towards small businesses. They actually regard doing business with small enterprises as risky. This is because such companies can collapse and leave them counting losses. That's why these institutions usually offer loans that attract high-interest rates, which can make them hard to pay off. They use it to ensure that they get almost all their money within a short time. Here are simple steps to get a business loan at the best rates when applying.
1. Organize your Financial Statements
Since your business may have yet to have any tangible assets that can be used to secure the loan you are applying for, you should organize your financial records. In fact, financial records typically reflect on the performance of your business. You can tell whether an enterprise is profitable by simply glancing at financial records. Therefore, you must keep the documents showing how you have been paying your employees and vendors.When your files are well organized, you can even take advantage of Invoice Factoring by banking on the services or products that are yet to be paid for by your customers. If you have an outstanding debt, you should pay it before applying for a loan. Most lenders will consider your credit score when setting the interest rate. If your credit score is poor, you will get a high-interest-rate loan and vice versa.
2. Build a Relationship with the Lender
You can't wake up one day and expect a lender to give you a favorable loan rate. Before you apply for a loan, you should identify a potential lender and seek to establish a lasting relationship with them. In fact, most banks give their loyal customers a low rate to reward them. You can start by opening a business savings account with the lender you intend to borrow money from soon. You should wait for some time so that your financial history can accumulate. This will actually create an impression that you are with them for the long term. Once you have built rapport with the lender's staff, you can ask for a discount when applying for the loan.3. Compare Various Offers
The worst mistake when hunting for the best business loan rate is taking the first offer from your bank. We are actually past the era when they were just a few lenders. Nowadays, thousands of lenders are interested in doing business with you. You should approach various lenders and settle for the one that offers a fair deal. As a matter of fact, traditional banks and virtual lenders conduct their business over the Internet. This means that you don't have limited options.4. Opt for Upcoming Lenders
There are two categories of lenders: those with a vast client base and the upcoming. The latter usually offer better terms because they have not made a name for their brand. They use low-interest rates to attract more customers and outsmart the giant industry players. On the other hand, established lenders will rarely give you the best bargain in the market. This is because they have many clients.5. Specify Why you Need the Money
Most lenders want you to be transparent as much as possible. They want you to account for every cent that you are borrowing. This helps them determine if your enterprise is viable. In other words, they want a comprehensive breakdown of how the profits will be generated and how you will repay the money. Some of the most common reasons entrepreneurs give include:- Buying equipment
- Recruiting more workers
- Boosting inventory
- Marketing campaigns
- Product development
- Acquiring new facilities
