- 1 What Is Merchant Cash Advance (MCA) and When Do You Need It
- 2 What Are the Bank’s Expectations from Your Loan Application
- 3 The Potential Collateral for the Business Loan and the Business Plan
- 4 The Audited Finances of Your Business
- 5 The Personal Finances of the Business Owner
- 6 The Reason Behind Your Loan Application
- 7 The Insurance Details Are Important
- 8 What Is the Process of a Loan Application
- 9 The Reason Behind the Loan
- 10 The Loan Amount Should Be Specific
- 11 Contact Professionals Beforehand
- 12 Keep a Record of the Credit History
- 13 Formulate the Business Plan
- 14 Present the Loan Application Gracefully
- 15 What Are the Chances of Loan Approval
Most businesses search for loan opportunities to either get back on track or to keep their operations going. Mature companies are the happy ones that do not need huge loans because their revenue can support them. There are many small businesses that consider business cash advance lenders to meet their capital requirements. However, there are a lot of different types of loans depending upon the need of your business. Some of these loans that are majorly requested include:
- Small Business Administration Loans (SBAs)
- Short term loans
- Long terms loans
- Invoice factoring loans
- Merchant Cash Advance (MCA)
The MCA is most popular among businesses, and here is the reason why.
What Is Merchant Cash Advance (MCA) and When Do You Need It
A lump sum amount required by businesses instantly against the sales is a Merchant Cash Advance.
These loans are needed for unexpected situations. You never know when your business needs a lump sum amount to spend. This is where you would feel the need for go-to cash which is MCA.
What Are the Bank’s Expectations from Your Loan Application
Every aspect of life has some expectations. Even in businesses, there are certain expectations you have from the employees and customers. Similarly, banks also have certain expectations from your loan application. Here are a few tips to help you out meeting the expectations of a business cash advance lender.
The Potential Collateral for the Business Loan and the Business Plan
The bank or any lender will want to know if you have some reliable assets to return the loan. You can pledge any of the assets like receivables or equipment for repaying the loan. Therefore, you have to have hard assets if you need a loan.
Your business must have a good business plan. This is an important requirement for your loan application. A well-formulated business loan will always be a bonus for you.
The Audited Finances of Your Business
Make sure you have all the financial statements of your business ready before applying. The bank would need them as well. The bank or lender should know if they are investing money in a safe place or not. If your finances are audited, it is a bonus point because it assures the lender about accuracy and formal responsibility.
The Personal Finances of the Business Owner
It is also necessary that you keep the personal finances updated and documented. The lender or bank will want to know if you have enough money to pay them back or not. This will include the automobile, mortgage, and any other assets you have.
The Reason Behind Your Loan Application
You need to explain to the bank or lender your reason for the loan. A specific and valid reason is an essential requirement that you need to fulfill a business loan application. They would also want to know the way you are going to use the loan. Both of the questions should be correctly answered. Otherwise, acceptance of the loan application might be difficult.
The Insurance Details Are Important
When it comes to reducing risks, the bank would also like to know the insurance policies you have and how your business is protected. For startups, it is a requirement because the lender wants to see if you will survive in the industry or not, or will you be able to pay them back or not.
What Is the Process of a Loan Application
The process for a loan might be a little bit tricky for startups, but if your business has completed six months or a year, applying for the loan is not a strict process. You have to keep all the requirements ready while applying. The few steps for business loan applications are:
The Reason Behind the Loan
A business cash advance lender or a bank would want to know the purpose behind the loan. For small businesses and startups, the reason is apparent, but with mature businesses, a detailed plan is necessary. Before applying for the loan, you should know precisely why your business requires a loan. Be specific while writing the reason. Interestingly, approximately $600 billion is granted as a loan for small businesses every year.
The Loan Amount Should Be Specific
Sometimes, business owners are not specific to the amount they need. While applying for a business loan, they generate all the financial statements. The more specific you are with the amount, the better your application will present you and the business.
Contact Professionals Beforehand
It is better that you consult somebody experienced before you apply for a loan. Online advice and counseling are always available. You can refer to them anytime you want.
Keep a Record of the Credit History
Make sure you get the business credit history in order before applying for a loan. If you are a newbie or the business is less than three years old, you will be questioned about all your past credit activity and the spending of your business.
Formulate the Business Plan
Firstly, do not go to large commercial banks for loans. Search for some small groups around you.
Secondly, you must have a business plan prepared before applying. If you want to get a small business loan from any business cash advance lender, a good business plan is a requirement. It will be easier for you to know how much money you need and when can you repay it.
Present the Loan Application Gracefully
Once you have all the required documents, make a presentation. Fix a meeting with the relevant authorities and present your business plan. State the purpose, and the needed amount confidently. Be relevant and to-the-point.
What Are the Chances of Loan Approval
Usually, the loan applications do not get rejected if the requirements, as mentioned above, are met, and you have attached all the necessary documents. According to the Fed Small Business’s 2019 survey, 79 percent of the MCAs and 54 percent SBA loans are approved.
Be it business expansion, growth, or survival; finance is an essential thing that you will need. If you have applied for a business loan with all necessary documents and made the reason for the loan clear, your application will be approved in no time.