Let’s be honest – applying for commercial loans is not easy. From regular follow-ups to selecting the right lender and understanding the process, there are many factors to consider. However, ignoring these steps or making mistakes while taking them can reduce the likelihood of your loan application becoming approved.

For example, your application can become rejected if you don’t submit the right documents or provide incomplete information. And if you cannot keep up with the lender’s requirements or deadlines, it can also lead to other issues with your loan. To help you avoid making such mistakes, we have listed seven of the most common ones below. Let’s take a look.

1. Not Understanding the Lender’s Requirements

Many business owners mistakenly think that to get approved for a loan, it is enough to simply submit your application and hope for the best. However, this is not true. In fact, to maximize your chances of success, it is essential to understand the lender’s requirements and avoid making mistakes while filling out forms.

For example, if you have a co-signer on your loan application but fail to provide their information, your application will be rejected by lenders (this includes phone numbers). On the other hand, if you make a mistake while filling out forms, your application will also be rejected. So, ensure you understand the lender’s requirements and provide accurate information on your application form.

2. Applying for a Loan Without a Plan

While having a business plan is important, knowing how you will use the loan amount is also crucial in order to get approved. Lenders will want to know what you’re going to do with the money and whether or not you have a repayment plan. So, before applying for a loan, you will need to ensure you have all your ducks in a row.

Here are some tips to keep in mind when planning your project:

  • Define your goals: How will you use the loan?
  • Know your numbers: What is the amount you need to borrow, and how do you plan to repay it?

3. Picking the First Deal

One of the biggest mistakes business owners make failing to shop around for the best deal. With so many lenders, it can be tempting to go with the first one you come across. However, this is often a mistake.

Before selecting a lender for your loan, it is essential to compare loan rates, terms, and conditions. This way, you can be sure you’re getting the best deal possible and avoid overpaying for your loan.

4. Not Listing All Your Assets

When applying for a loan, it is essential to provide all your asset information. As such, it is necessary to include your real estate properties and other investments in the list. In turn, this will help lenders determine the risk they take if they approve your application. 

5. Not Checking Your Business’ Credit Score

Lenders consider your business’ credit score as one of the most important factors when evaluating your loan application. If you have a low credit score, getting approved for a loan will be difficult. So, before applying, it is necessary to check your business’ credit score and if it is too low, to work on improving it.

6. Applying for the Wrong Amount

When applying for a commercial loan, it is crucial to request only the amount you need. In fact, asking for more money than you need can increase your chances of being rejected. In addition, it can also make it difficult to repay the loan. All in all, applying for a larger amount than you need will make it harder to get approved and result in higher interest payments.

7. Not Providing Collateral

Collateral is an asset that you can pledge as security for your loan, and it can include assets such as real estate property to equipment. However, if you fail to repay the loan, the lender can seize the asset to recoup losses.

Final Words

Getting a commercial loan can be a straightforward process if you follow the above-mentioned tips. If you still have any questions or concerns about the loan application process, please feel free to comment below.