6 Errors with Business Loan Applications and How to Avoid Them
No one likes to waste their time. When it comes to obtaining a business loan, the stakes are higher, and time matters.
Any errors with business loan applications can delay funding. It can even cause your application to be denied.
Having to redo your loan application paperwork from the start is something that can be prevented with a little foreknowledge. Here’s how to avoid errors with your business loan application and streamline the funding process.
1. Putting Incorrect Information
This can be costly, as lenders may reject an application if they discover inaccuracies or misrepresentations. Businesses should double-check all of the information provided and keep track of all qualifying documents.
Additionally, getting trusted individuals to review the application and provide feedback can help catch errors before the application is submitted. This could potentially save money and time in the long run. If a lender suspects that the information provided is wrong, businesses should be prepared to offer extra documentation to prove their eligibility.
2. Submitting Incomplete Documents
To ensure a successful loan application, the borrower must submit all the necessary documents, including business and personal tax returns, financial statements, bank statements, and other required documents. You also need to get a DUNS number for your business to increase your creditworthiness.
Accurately completing all parts of the application and including all required documents is essential for processing the loan application.
3. Lack of Research
Pursuing a business loan requires due diligence. One of the most common errors associated with business loan applications relates to a lack of research.
It is essential to research the type of financing you require, the business loan provider you want to work with, and what they expect. This includes the necessary documentation, the cost of credit associated with the loan, the terms, and conditions of the loan, repayment plans, etc.
4. Not Responding Timely to Lender’s Questions
Failing to respond promptly to questions submitted by the lender can be a common obstacle in the loan application process. It can lead to delays in the loan approval timeline. This is especially if the lender requires additional information or documents.
When meeting with the lender, be sure to answer any questions accurately, provide the correct documentation, and do so in a timely fashion.
5. Not Reading the Terms
Loan terms can often be comprehensive and complex. Because applying for a loan can be time-consuming and costly, businesses tend to skip over this step. Failing to read the entire loan agreement can leave business owners with an unfavorable loan rate and excessive fees.
Companies should make sure they understand all loan terms and ask questions if they find certain clauses ambiguous before they sign the agreement.
6. Not Having Collateral
Collateral is an asset that the bank can seize and use to offset the debt of the loan in case of default or lack of payment. Those who choose not to include any collateral in the loan application will have difficulty qualifying and have a hard time securing their loan.
The most important way to avoid this mistake is to always make sure you have collateral when applying for a loan, even if it is something you don’t think necessary.
Avoiding Errors With Business Loan Applications
By understanding the most common errors with business loan applications, lenders and applicants alike can confidently go through the process. Following these steps helps ensure that you are successful in obtaining your business loan!