How to Look Credit Worthy and Secure a Business Loan

Written by Ruth Njiri

Loans are almost synonymous to business ventures. In fact, most businesses need some form of financing to cover various needs such as buying new equipment, expanding their office space, and so forth. 

Getting a loan from a financial institution can help you achieve these immediate needs. Money is the lifeline of any business, so whether you are starting a business or running an existing one, being able to secure a financing bridge is crucial. 

A business loan is a loan that is specific towards financing a particular purpose within a business venture. There are many different types of business loans but they are all dependent on the lender.  

In order to ensure you secure a business loan, you need to look at your business from a lender’s perspective. A lender will only finance what they believe is a creditworthy business. 

For any lender to consider you as a creditworthy business, you should ideally fit the following criteria:

  • You must be of good credit and character when it comes to borrowing from lenders
  • You should have  a steady cash flow that is able to repay the loan and also sustain your operations
  • You need some form of collateral in order to guarantee the lender some compensation in the event your loan is unpaid
  • You must have a capitalized business and made particular investments that form part of a capital budget
  • You should have established trade lines with your suppliers and have and have an existing line of credit
  • You should have a good repayment history 
  • Your public records should be clean

Furthermore, in order to qualify for a business loan, some lenders shall require: 

  • Your business personal and business credit history
  • Your personal and business financial statements for existing and startup businesses and as well as a projected financial statements
  • A strong, detailed business plan (including a financial plan that details how you shall utilize the money)
  • The cash flow projections for at least a year
  • Personal guaranties from all principal owners of the business

As a business, you need to choose your loaning institution carefully. Some lenders that have a larger asset base may shy away from small loans and small businesses due to the tendency for those loans to underperform. 

Try and approach banks or loaning institutions you have worked with or are a customer talk to a lending officer and find out exactly what documentation they require.

Furthermore, be thorough, bring everything they ask. Many loan applications are denied or face unnecessary footraces because of incomplete applications. 

So, even before you start gathering and organizing the information required by lenders to consider your application, you should educate yourself regarding business loans so you can understand and discuss intelligently with the lending officers when the time comes.

When it comes to looking creditworthy, developing a good credit history can be key to helping you secure that much-needed business loan. 

You can do this simply by starting with business credit cards and then establishing trade lines of credit with existing suppliers. 

A businesses credit score is a way that many lenders use to establish how trustworthy and responsible you are as a business.  

In summary, the best way to look creditworthy is to constantly update your information in credit reference bureaus, establish trade credit lines and make all your payments early time. 

Do you think your business is creditworthy? Will the tips above help you establish that? Let us know in the comments section herewith. 

Good luck!

Learn more:

  1. Ten Ways To Make Your Business Creditworthy
  2. What Do Lenders Look For In A Creditworthy Business


About the author

Ruth Njiri