When you are running a business, there can be times when you need a little extra cash to run processes or expand as per your further plans. A business loan can be used to fuel growth and fund other business initiatives. However, getting business loan approvals can be difficult sometimes. If you are planning to apply for one, the following tips can be helpful in ensuring a smooth approval of your business loan.

Factors affecting business loan approval

Before understanding how to get approval on your business loan, you must know what are the factors that contribute to the approval of a business loan.

1.   Personal credit history of the proprietor

2.   Credit history, cash flow status of the business

3.   Collateral

4.   Business plan, scope, and projections

Tips to improve approval of a business loan

Based on the factors mentioned above, we have enlisted 5 ways that can ensure a positive response from the lenders for your credit request. Have a look at the points mentioned below in detail:

• Maintain a good credit history

Your bank or lender will assess your personal credit history while deciding on your business loan application. So make sure that your personal credit score is well-maintained. You can improve your credit score by paying the loans and EMIs in time, make sure you don’t utilize your credit cards to the maximum limit.

• Keep a check on the liquidity of your business

Banks are diligent and ensure that they provide business loans to only the eligible applicants. For this, they ensure that your business health is intact in terms of cash flows, business credit history, outstanding payments, assets and liabilities check, inventory, cash, etc. if everything adheres to their rules, your business loan application will get approval from the lender.

• Decide on collateral

Traditional banks and lenders provide loans against collateral in case of business loans. The collateral is usually provided on a personal guarantee by the owners of the company or sole proprietor to get the loan. Banks prefer to provide and sanction loans to businesses with guarantees, i.e. against collateral. Some of the lenders do not ask for the collateral at all to provide a business loan.

• Know your business plan, scope and projections

Banks want to ensure that they provide loans to a business that is capable of paying off the debt and has potential. If a business is able to showcase a plan that has scope in the market to perform and the potential results land them in a position to pay off the loan amount easily, there are higher chances of getting a business loan approval.

• Choose your lender wisely

Here’s a pro-tip. Whenever you are applying for a business loan, make sure to do your bit of research. Check for the terms and application process, read through all the conditions, and understand the overall process. A lender may not provide all of the services mentioned, so do your search to those that offer the type of financing you need and get your loan application approved based upon your creditworthiness.

These are a few tips that can help you accelerate your business loan application. There are plenty of options available to get a business loan. Applying to multiple lenders would only hurt your credit score.