Raising an optimum level of cash is a difficult task for small business entrepreneurs, particularly now, when conventional lenders have pushed small businesses at the end of their list. However, there is still a lot of room left for small business entrepreneurs to seek a loan, given they avoid making mistakes that could hurt their borrowing abilities.
Here are some of the mistakes that can break a business’ credit image in the eyes of lenders.
- Not fulfilling requests made by the lender – During the application process, lenders often ask for a lot of information, some of which might not be readily available to the business owner. However, overlooking such requests could spell rejection of a loan application. This is why it is crucial for an owner to be attentive to any and every piece of information sought by the lender.
- Going overboard with credit card spending – Using business or personal credit card to the full credit limit can prove to be damaging to a business from a loan perspective.
- Miss reading the fine print – It is very relevant for a small business to read the finer details or terms and conditions written in a loan agreement. Ignoring such details could lead to problems in the future and may even push borrowing costs higher for the borrower.
- Defaulting on payments – Perhaps an obvious one, but missing payments is a terrible idea for any borrower. Missed repayments could lead to building up of penalties and fees. An overstretched history of delayed or missed payments can only hurt the credit profile of the business.
- High Turnover – Having a high turnover at the time of applying for a loan can raise red flags for lenders and negatively impact the credit of the business. For any lender, stability in the business is of prime importance and any unjustifiable degree of turnover could lead to rejection and the diminished ability to raise finances.