Most businesses borrow money externally to cope with fund problems, which is very helpful and effective. However, acquiring a loan is not always easy. Even if you get a loan, it might not be enough to take care of all your needs. If you want to increase your borrowing capacity, you should keep these factors in mind before approaching a lender:
- When you apply for a loan, most lenders will first look at your repaying capacity. It is determined from the revenues of your business and collateral. Lender will review your financial history to check the cash flow.
- Hence, if you want to increase your borrowing, you should make sure that your business is making consistent profit and is growing steadily with time. When your profits increase, the lender will have more confidence in your business, as your repaying capacity will be high.
- Similarly, the lender also checks your personal credit history. If the credit report reflects delay in payments, default in repaying earlier debts, or bankruptcy, the lender will not increase the loan amount.
- It will be too risky for him. Hence, you should be careful about your credit profile. Always pay debts on time and keep checking the report for errors. Get them corrected immediately and keep your credit report clean with a healthy score.
- You should also think twice before borrowing cash. If the lender notices that you are already in heavy debt, he would not consider a higher amount as a loan.
Furthermore, in order to increase scope of borrowing, you should build the equity of your business.
Lenders like to see improved profitability when considering a bigger loan application. You can infuse finance in your business to reach an impressive debt to equity ratio, which will be helpful in obtaining a larger loan for your business needs.
Collect More Data on Business Loans! Give an Appropriate Cash Injection to your Small Trade.
