The lenders are going to dive deep in order to determine your eligibility for a business loan, including your personal as well as business credit status, your business banking details, personal and business tax returns, P&L statement and a lot more. If this seems like a complication to you, do not worry. While you cannot make these factors perfect in a matter of days, you can definitely avoid these mistakes while applying for a business loan.
- Missing a payment
Do not miss out on any kind of payment on your personal as well as business credit cards, vendor accounts or any accounts that report to the credit agencies. Payment history is the primary factor that plays the main role in both personal and business credit score. Just one late payment can significantly bring down your credit score. Lenders are going to take a keen look at that.
- Making huge purchases on your credit card
Huge purchases can also impact your credit scores if you are not paying them off on time. This applies to both personal as well as business credit card. Huge purchases can take up your credit utilization which also influences your personal and business credit scores significantly. If you need to make large purchases on your credit cards, fund out when your card provider reports to the agencies, and before they do that, pay off the balance so that the high credit is not reflected on your report.
- Letting your bank balance dip below $1000.
Lenders favor seeing some amount of cash flow available so that you are able to meet the current debt obligation. A low balance signifies that your business isn’t in a good shape financially. Negative balances are obviously a red flag. If your bank balance is low, consider transferring some amount of cash so that it doesn’t dip too low during cash-flow emergencies.
- Applying for certain types of loans
A payday loan for a small business is termed as Merchant Cash Advance which is abbreviated as MCA. In MCA, the MCA provider pays a one-time amount instantly or the same day as the application, to the merchant in exchange for a percentage of future credit or debit card sales. Fast installment loans come at a price, but, MCA charges a high-interest rate. Hence, you should avoid taking MCA and take business loans from slickcashloan instead.