When preparing to borrow funds to invest in your business, you want to feel confident that the loan is likely to be approved.
We have prepared this list of 3 ways your loan will be instantly declined to help you overcome them before getting started. Once you can overcome these three issues, you’ve increased the likelihood of the ‘go-ahead’ you are hoping for.
1. You are not managing your monthly creditor obligations well.
This looks like:
- dishonouring transactions in your bank statements,
- unarranged overdrafts in your bank statements, and
- late payment of bills
You can overcome this by:
- preparing a monthly budget outlining due dates of creditor invoices and payments and making sure money is in place to pay your direct debit payments on time.
- forecasting your cashflows with your accountant to predict when there will be a shortfall, so you don’t take too much out of the business too soon.
- Negotiating better payment terms with both your creditors and debtors so your cashflow cycles are in synch.
- Making sure there is sufficient working capital in the transaction accounts to allow for seasonal fluctuations in your business.
2. You don’t have a clear purpose for the loan funds.
Gone are the days where you can go to the bank and ask, ‘how much can I have?’ With responsible lending protocols in place, you need to have a simple explanation for the loan purpose.
You can overcome this by:
- Preparing a forecast to show the outcome of the introduced working capital, such as the increased turnover of that new equipment or staff member.
- Showing invoices, quotes, or website links for the equipment you want to buy.
- Settlement statements for any loans you want to refinance.
3. There are a large number of credit enquiries in a short space of time.
It makes sense that when you are applying for credit without a broker you may apply to a couple of places and see what the best deal is, but if there are a large number of enquiries in a short space of time, lenders start to ask what might be going on and why no loan has been successful before now. It may also take points off your credit score each time an enquiry is made. So, be mindful with the number of enquiries you are making, or better yet, work with a broker like Spinach to save time and hassle.
At Spinach, we are business loan brokers who work with 26 financiers to find solutions for any business purpose. So, to have a confidential chat about your preparedness, or about the goal you are trying to fund, get in touch with Jemma on 021358433, or jemma@spinach.co.nz or visit our website www.spinach.co.nz
*Note this is not personalised financial advice. Usual lending criteria, fees and interest rates apply.