The difference between a business loan approval and a personal loan approval is often a gulf of experience and discipline. Commercial lenders want to see professional success from the borrower and are more discriminatory than personal lenders. Industry experience, cash reserves and strong commercial credit lines weigh heavy on commercial banks.
“But how can commercial loan success be part of the equation if I’m applying for the first time?”
First-time applicants are often approved, but don’t qualify for the rates and terms a seasoned business owner receives – it’s often a “pay to play” scenario for first-timers. “Activity creates opportunity,” is true and there is just as much or more education in defeat as in success. For anyone trying to get approved for a commercial loan – it’s critical to understand the reasons for the decline and fix them.
The eight steps below are a good place to start in the pursuit of business loan success:
- Know your credit score and monitor it regularly – we like Credit Karma because it’s effective and free.
- Maintain clean bank statements, avoid overdraft fees and save cash for the down payment because depending on your situation – lenders require 0- to 40-percent down of the financed item.
- Also, lenders want to see 10- to 15-percent of the purchase price in reserve which can be in a savings account, 401(k), stock portfolio, etc. Lenders like stability.
- Pay bills on time – it’s best to pay in full, but if not possible, then pay the minimum and avoid late payments.
- Own something! It’s best to own a home, but if not, then own land because lenders like owners. For renters, it’s better to own a home, but five years of address stability is the next best thing.
- Establish an LLC or corporation and start a “time in business” clock.
- Separate commercial and personal spending – use the commercial bank account for business expenses and personal bank account for personal expenses.
- Consider credit repair to clean up credit mistakes – we have a reliable credit repair solution that can remove some credit challenges such as charge-offs, medical collections, inquiries, and even bankruptcies.
If you have questions about any of the above – please ask and we can help. And if you’re looking for a credit repair specialist – we have someone we work with regularly and we’re happy to make a connection if interested.
A decline today is often the beginning – not the end.
To speak with a commercial loan consultant and learn more about your situation, call 972-476-0020.