When seeking credit to acquire a new business or grow an existing business, there are many things a business owner can do to ensure a quick and successful loan process. There are also several things a business owner can do to hinder the loan process. In this post we have compiled a list of the three biggest mistakes business owners make during the loan process, so you can avoid making the same mistakes in your loan process.
Making Large Purchases
During the loan process, every owner of the business is being evaluated for creditworthiness. Large purchases, such as new cars, equipment, or homes, raise flags with credit underwriters who are working hard to mitigate as much risk as possible for the bank. Their primary job is to ensure approved borrowers are financial stewards of lent funds. Making a large purchase while requesting to borrow money is generally viewed as poor financial management and can impact a lender’s decision. Borrowers need to hold off on these purchases until the loan is closed.
Not Responding to Requests
Lenders truly want to loan money to worthy borrowers and do everything in their power to make loans happen. However, much of the process depends on the borrower providing important information and documents in a timely manner. Any delay securing tax returns, statements, and other key information can delay or even kill a loan. Borrowers need to come in prepared to provide financial and business information and to be responsive to lender requests.
Not Fully Disclosing Critical Information
The lending process is a process of discovery. The more information that is discovered early on, the easier it is for the lender to identify the right loan products and structure to ensure approval of the loan. Not disclosing critical information including business ownership structure, financial information, criminal history, and other required data can create problems in processing and underwriting. Borrowers need to be transparent and forthright with their circumstances, so their loan advisor can help them make the best case possible and ensure they get the best loan option available for their needs.
Borrowers who are smart with their purchasing and who communicate fully and in a timely manner can make it through the loan process quickly and with little impact on their daily business operations. Your lending team is truly there to help you as a borrower and do everything they can to not create unnecessary work during the loan process. If you do your part as a borrower and are creditworthy, you will receive the advice and funds you need to drive the growth of your business.