Getting approved for a business loan or line of credit is more difficult than qualifying for a personal loan. It’s crucial that small business owners are adequately prepared to meet with a lender to present their business in the best possible light and qualify for the money they need.

Here’s what you can do to streamline the loan approval process for your small business.

Your business risk profile

One of the most important parts of any business loan application is demonstrating to a lender that your company is able to make regular payments and repay the loan in full. If your business is profitable, you can show you’re a low risk by presenting cash flow statements, a detailed business plan and, of course, your good credit history. Some of the most common reasons a bank won’t grant a loan to a small business are a lack of security (e.g. no business assets), a poor or non-existent credit history, business inexperience and/or a weak business plan.

Know your credit score

It’s highly recommended that you review your credit score before you apply for financing. That way you’ll know whether it might be better to wait until you’re in a better position to qualify. Check that your report is complete or free of any errors that can affect your score. Your credit report includes your payment history for credit cards, equipment leases, mortgage or office rentals, electricity, phone fees and other business expenses. A simple omission – say your internet provider, whom you always pay on time, isn’t included in your payment history – can result in your credit score being lower than it should be, so be sure to correct any errors immediately.

Before you apply for financing

If you suspect a lender will decide your business is too high risk for a loan, or you’ve been denied financing, apply for business credit instead. Your spending limit may be low to begin with, but a credit card will give you that opportunity to build a good credit history. Pay off your balance – or, at the very least, make your minimum payment each month. Keep up with your other financial obligations, too, such as any personal loan payments, rent, leased equipment and any income taxes owing. Apply for a loan in six months to a year and you’ll have a much better chance of approval.

Before you apply, be sure you have all the documentation needed to support your loan application. Include in your portfolio copies of business banking statements, financial reports, a detailed business plan including projections and a well-researched marketing plan.

You should also be prepared to discuss with a lender why you need to borrow the amount you’re asking for, the length of term and how your business can afford to repay it. Make a strong case for funding by demonstrating profitability, a good credit history and a solid business plan, and you’ll be in an excellent position to qualify for the funds you need to grow your business.

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These tips can help you with the process of making plans to help guide your business to greater success.

Set priorities

Entrepreneurs are typically highly creative and optimistic; as a result, they often have difficulty narrowing down their ideas from among all the exciting possibilities, whether it’s an opportunity to expand to a new market or choosing a better time management strategy.

As you update your business plan, focus on what’s most important for your business to achieve this year. Then break your goals down into smaller tasks, to maximize productivity and enjoy the little successes that lead to big changes.

Start by defining your top three business goals for the next four quarters. With those in mind, do some research to help you decide on the best way to achieve those three goals – and a reasonable timeline for meeting specific targets.

Think different

Your priorities in the coming year may be to hit a certain revenue target, launch a new product line or tap a completely new market.

An important thing to keep in mind as you make plans to move your business forward is how you’ll stay competitive. For instance, it’s important to review your pricing strategy on an annual basis, to ensure you continue to attract new prospects and retain customers.

As part of your overall business planning process, spend some time on competitive intelligence, too. Include in your plans how you’ll increase value for your offerings and continue to stand apart from the crowd.

Find money

If scaling your business is on your agenda for the year ahead, and you don’t have savings earmarked to fund your ideas, you’ll want to make sure your business plan includes adequate financial planning.

Applying to a lender for a business loan is one option. In this case, you’ll want to include up to date cash flow reports, income statements, budgets and projections in your plan for a potential lender.

If your business doesn’t have a credit history, you may need to look at other options for financing your plans. Using a business credit card on a regular basis and paying off the balance can help you build a good credit rating, which will help you prepare to apply for a loan down the road.

Your accountant can also help provide additional financial advice and support as you update your business plan, based on your most current financial records.

With these business planning tips in mind, you’ll be well-prepared for a new year of growth and continued success.

Final tips

• Review your business plan every quarter to ensure you stay on track with your goals and priorities throughout the year.
• Be realistic about opportunities and challenges as you plan ahead. Your accountant can offer business advisory services – and help you set meaningful short and long term goals.
• As alternatives to applying for a loan or line of credit, consider crowdfunding or angel investing to help you meet your business goals.

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Assess your debt situation

Take a detailed look at all of your debts – both current and long term. Evaluate which ones are more urgent and which can be parked until some progress is made.

The key determining factor should be the interest you’re paying on your debts. For example, those with the highest levels of interest should be paid first.

Also list your debts from smallest to largest. Maybe some of those smaller debts can be paid off quickly without much hassle to enable you to focus on the larger ones. Consider consolidating all your loans into one payment if possible.

Cut costs and free up cash

Try to cut any unnecessary costs and free up some cash in the process. Think about how much you spend on each of your daily expenses – is there room to cut some of those costs?

For example, building firm may shout takeaway coffees for its workers a few times a week. Maybe a cheaper way can be found to continue providing coffee, such as instant coffee on site with hot water from a thermos, rather than expensive takeaways.

Have a look at how long it’s taking your debtors to pay you. If your customers aren’t paying on time, come up with some solutions for encouraging them to pay quicker.

Early payment discounts could work well but make it clear on each customer’s invoice. Alternatively, tighten up invoice periods so there are less days for your debtors to pay before penalties. Make sure you let them know about any changes and the reasons for those changes.

Reassess funding

Have a look at how you’re using funds to pay off your business’s debt. Do you have funds available that could be better used to reduce debt further? Perhaps you have money in a current account that isn’t being used optimally – lowering debt and hence future payable interest could be a wiser choice.

Examine your cash cycle, when payments come in and when they go out to pay your creditors. Where does the incoming cash go before it gets allocated? Is there any you can reassign to debt payments?

Sell your assets

Another option for freeing up funds to reduce your business’s debt might be to sell some assets. What do you have money tied up in, but don’t use often enough to justify?

Any equipment that’s not being used could be sold off. One example could be a builder who has an oversupply of power tools – making a detailed list of all their tools and how frequently they’re used might reveal some surplus assets.

Make sure you’ve calculated depreciation correctly

Have you depreciated all the assets in your business that need to be depreciated? It’s important to get these figures correct including the ratio of personal to business use, if you use an asset for both.

For example, a company vehicle will need to be accurately depreciated in relation to its usage over time. We can help you calculate depreciation correctly and also check whether you’re entitled to any tax rebates.

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