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Operating a business isn’t easy– it takes a vision of success, the right team, and a continued thirst for growth. And at some point, all businesses require funding to shape these dreams into a reality.
Pre-approval for financing is a great indicator that you’ll be able to get the funding you need. Even if you’re pre-approved, though, it’s possible for a lender to learn new information in the later stages of the deal that prevents the deal from closing.
But it’s not completely out of your hands. With the right strategy and a proactive approach, you can ensure that your deal reaches the finish line.
In our new eBook, 9 Ways to Prevent Your Business Loan From Dying, we tell you everything you need to know to get your next deal approved. Read on to get a quick overview of what you can do to help your deal close.
How to Take Your Business Loan to the Finish Line
When it comes to lenders issuing an approval, almost everything you do in the months leading up to this point counts. If it’s visible on a bank statement, then lenders could take note—and may (or may not) change their minds.
These are the steps you can take to make sure that your deal makes it through the final steps and your business gets financing!
1. Deposit All Monies in Your Bank Account (NOT Just Credit Card Sales)
While credit score is no longer the make-or-break factor that it once was, your business’s annual sales are still crucial.
This figure tells the lender how much money your business is making on a monthly or yearly basis.
For this reason, it’s helpful for you to deposit all of your monies into your business bank account. This includes not only credit card sales, but also cash sales.
2. Keep Your Account Positive
In the same vein, lenders will want to make sure that your account is positive. When you apply for small business financing, you should always avoid having a negative balance.
Managing cash flow isn’t always a cakewalk—it’s actually one of the most common difficulties among small business owners.
But if you’re planning to grow your business and need financing, getting your business bank account positive is a must. Underwriters tend to steer clear of making significant offers to applicants with negative balances.
3. The More Liquidity, the Better
When it comes to approvals, the more cash you have on hand, the better.
Underwriters consider a variety of factors. But when it comes to approvals, they’re primarily interested in whether or not you have the capacity to pay the full amount back on the appropriate timetable.
4. Maintain a Consistent Revenue Stream
Sure, business growth is a key consideration when it comes to evaluating your application. But demonstrating growth alone may not put you over the finish line.
Consistency, on the other hand, will.
Cautious underwriters might see sudden and unsustained sales spikes as an outlier or fluke. They might also consider them alarming.
Higher sales will never hurt you, but be sure to avoid manipulating the numbers to show massive spikes.
5. Accurately Report Your Debt - The Underwriter Will Find It!
Before giving the final stamp of approval, underwriters will take a thorough look inside your account.
By examining your credit history, they’ll be able to find all of your past, current, and future debts.
For this reason, it’s important that you accurately report all of your debt the first time around.
If you owe 90K, then don’t tell them that you owe 50.
Lying about your debt to an underwriter will never help you, so be sure to always report your debts in full detail.
6. Show ALL of Your Business Bank Accounts
It’s not uncommon for business owners to have multiple bank accounts. This is an organizational tactic many business owners use to keep their monies organized by separating payroll, operating, and other expense/revenue streams.
But while you may know how this money is organized, it may not be clear to your underwriter.
Underwriters will attempt to track all of the revenue you’re reporting inside your provided bank accounts. If you report $250K in revenue, but they can only find $70K, then that’s a huge discrepancy.
Always inform the underwriter about all of your business bank accounts so they get the clearest picture.
ABOUT THE AUTHOR
Joseph Camberato is the CEO & Founder of National Business Capital, where he has led the company in funding more than $3 billion for growth-minded businesses since 2007. With firsthand experience building NBC from a startup into a national private lender, Joe writes on the economic forces shaping access to capital, including interest rate shifts, private credit trends, and the challenges mid-sized companies face when banks pull back.
