Posted: Tuesday, 1 August 2023 @ 10:57
Lots of people look to borrow money for lots of reasons, but the current rate of rejection for business loan applications averages around 65%. Broadly speaking, that most likely means one thing - the applications don't fit the type of lending that the lenders do. That brings us to our most practical tip for successful business loan applications - don't ask for an avocado bathroom suite from someone who only sells white bathroom suites. Let us explain…
Lenders want to lend
If you go to a bathroom showroom and all they sell is white bathrooms, don't ask for an avocado bathroom because the answer will be no. It's not because they're unkind or they don't like you - they want to sell you a bathroom because it's their business. However, you're asking for something they simply do not sell. You need to go to the avocado bathroom shop.
Similarly, lenders are in the business of lending - they want to lend. At Rivers, for example, we do everything within our power to make a loan. We don't like turning loans down because it takes as much time and resource to do that as it does to accept one, we just don't make any money on the applications we turn down.
Equally, the brokers that have the most success with us are the ones who give due consideration to the types of loans we offer and only put forward potential borrowers who they believe fit our criteria. That, in turn, creates better relationships, and the same is true for other lenders as well.
Practical tips for successful business loan applications
If you're looking for a business loan, there's a lot of information out there about how to go about it, telling you to check your forms, make sure your credit score is good and so forth - all of which is very much the groundwork for a successful application, but what then? At Rivers’ we're into brass tacks advice, so here are our recommendations:
Take care to understand the lender's business
Have a look at what the lender does and if what you want fits within the criteria, keep going. The crucial thing is to make sure it's the right type of loan for you - if they only lend between £5,000 and £50,000, then don't ask for £2,000. If they say they lend for between two to five years, don't ask for terms of seven years. Someone else will probably provide the product you’re looking for, but lenders have a business plan - if you don't fit within their plan, look for someone who does suit you. For example, at Rivers we lend to businesses - we don’t offer personal loans, however good the credit is.
Be honest from the start
Once you've spoken to us and you have given us your initial details, we will run all the regular checks to make sure everything matches up. If it doesn't, then it's a warning signal - not just because of the information itself, but because there's an implication that you weren't being upfront. Even if the mistake was honest, it doesn't reflect well. Saying things that aren't true causes mistrust, so check and double check your information to make sure it’s honest and accurate from the start.
Be timely and helpful
Another thing that helps get a loan over the line is to deal with things in a timely manner. If you make an application and say it's urgent, don't spend three days coming back with information when you’re asked for it. We will always do our best to turn loan applications around quickly because we understand that cash flow is an essential part of running a business. However, to achieve that, you need to do your bit as well.
Be accurate first time
Accuracy isn’t just about the information you provide on your loan application. It’s also about following instructions to the letter. It might sound pedantic, but, for example, if you're asked to sign a document, don't just initial it. It’s a bit like doing your passport photo - there are set parameters on what the lender wants, so it’s best to stick with them to avoid unnecessary back and forth.
Be polite
While it won't make an unsuitable loan application suitable, never forget that a dose of good old fashioned courtesy never hurt anyone. Even if you don't get what you want this time, it doesn't mean you won't next time. You never know where good relationships will lead in the future - businesses develop new products, your own situation and needs will evolve as well or we may be able to recommend someone else for you to speak to if we can’t help.
Find out more about Rivers business loans