In these uncertain economic times, applying for a bank loan can be a frustrating experience. When it comes down to it, bankers don’t like to take big risks. Their main concerns are to protect their capital, recoup the principal of the loan, make a reasonable rate of interest, and ensure you prosper and open more accounts with them. Essentially, they want to help you, but they’re not going to take a big risk on your either.
To help ease the mind of the banker, your job is to provide them with as many reasons as possible that they should feel safe giving you a loan. Whether you are looking for a fast cash loan, a short-term loan or a large business loan, the following are just some of the ways you can improve your chances of getting one from the bank.
Know what type of loan you need
Small business owners know the world that relates to their industry, but not that of the banks, which is why it’s so common that people apply for the wrong type of loan — for example, applying for a short-term loan to cover a long-term purchase. When the purchase you want to make doesn’t match the type of credit you’re asking for, bankers will be quick to deny the application.
Have collateral and a repayment plan
Bankers need to feel confident that the money they lend you will be paid back in full, and loans backed by collateral are generally paid back more diligently. If you have some kind of collateral you can use, such as a home, vehicle or equipment — as well as a detailed description as to how you intend to pay the loan back — then your chances of approval are far better.
Maintain good personal credit
If you think bankers aren’t going to look at your personal credit history when deciding whether or not they’ll give you business loan, then you’re mistaken. Especially if you’re looking to start up a new business, the only record the bank can use to determine your creditworthiness is your personal credit history. If you want to get a business loan without any hassles, you must maintain good personal credit as well.
Make a difference with your business plan
Your business plan can be used to gain favour with the bank as long as you use it wisely. If you can show the loan will increase your earnings and lead to a swift reduction in your debt/net worth ratio, then the chances you will get a positive answer will significantly increase. Good bankers are the ultimate realists, and they like to see facts that prove the loan they give you isn’t just going into a black hole.
Establish a good relationship with the bank
Bankers are far more likely to scratch the back of people they know to be trustworthy, and that is usually the people who have a long-standing relationship with their bank and with them personally. Take the time to get to know your banker so you can build a relationship of trust and respect, and this will greatly improve your chances of getting a loan approval.
Bankers just want to know they can trust you and that they will see their money come back to them, so doing anything you can to ensure you are trustworthy and responsible will inevitably get you the loan you need.