Provide a good reason and clearly defined use case for the loan
There are a variety of reasons why you need to provide a clearly defined loan purpose: it allows your lender to assess if the loan will be a good fit for your business (or to suggest alternatives that would be a better fit) and to evaluate if your business will make a good investment.
To foster trust with your lender, you’ll need to show that you have a clear plan for your funds and how it contributes to the growth and success of your venture. For example, if you’re obtaining funding for marketing activities, it helps to prepare a summary of your marketing strategy, highlight past projects and strategies that have been successful and indicate how you’ll be using the loan to further replicate these successes.
Clean and clear accounting in bank statements
Lenders want to see a clean bank statement - one that shows regular deposits, a healthy bank balance and no negative ending balance- as it’s an indicator that you’re on top of your business finances, and will likely make a reliable borrower.
If you’ve had a negative ending balance day, it doesn’t mean that you’ve blown your chances at getting your loan application approved. Be prepared to explain why you have a negative ending balance; you’ll need to provide background information on the situation and why you need access for the funds, along with details such as the dates and account number. Highlight that this is a one-off incident, and show how you’ve implemented measures to prevent similar incidents from occurring.
Provide documents that support your cash inflow projections
In reviewing your cash inflow projections, lenders want to assess that these projections are realistic and aren’t too far off the mark from industry benchmarks or your historic performance. In addition, they’re also looking to see if you’ve left a reasonable amount of wiggle room, such that you’re able to meet your loan repayments when unforeseen expenses crop up.
Therefore, it’s important that you include documents that will support your cash inflow projections in your application, such as recent invoices, aging list of debtors, evidence of confirmed orders or contracts, up-to-date management accounts and third-party payment transactions (for B2C businesses).
Build up your personal credit score
For small businesses - in particular newly established ventures without a solid credit history - your personal credit score is an important factor of consideration when lenders assess your loan application. That’s because it’s an indicator of how reliable you are with your financial obligations; if a business owner has a pristine personal credit record, it’s safe to assume that he or she will be on top of their business finances too, and be timely and consistent with their working capital loan repayments.
Take it from a lending startup: At Aspire, we're committed to helping your business succeed.
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