Obtaining a small business loan is sometimes necessary even after a business is established. However, these loans can be a little tougher to get. You can increase your chances of getting funding by avoiding these things.
1. Your accounts don't show a lot of deposits.
Your business bank accounts and financial records may be requested when you apply for a small business loan for an existing business. The lender will be looking for regular deposits into your business accounts. Stagnant accounts that don't prove a lot of revenue will not look good on your part. Before applying, make sure you are placing a steady stream of deposits into at least one of your business accounts.
2. You have no tangible collateral to speak of.
You still owe most of what you borrowed to get your small business building. The equipment you have in use is leased. And there are no owned company vehicles. You may have a hard time getting a loan if your small business does not yet have any paid-for assets that could potentially be used as collateral.
3. You don't have a reasonable plan for the money.
This is a tricky thing. What you see as a logical need for a loan will not always be viewed the same in the eyes of a lender. You should really have a good plan in place for the money, but you should also be able to show the lender how this loan will help your business succeed, grow, and make more money. For example, you may be more likely to get a loan:
- For improving your business property because existing issues are hindering sales
- For investing in equipment that will allow you to enhance your services offered
- For marketing your business in a new way that is likely to attract a new set of consumers
4. You have experienced slow sales revenue.
Loaning to a small business is often considered risky for the lender. Small businesses come and go in the market; they are more likely to completely drop out of existence and step out of the market with a lot of debt that can't be repaid. Slow sales revenue tells a lender that your business is struggling to generate a lot of profit, which can also look like instability of the business's future. Before you consider visiting a lender for a small business loan for an existing business, make sure you have some consistent sales revenue to show.