Working Capital Loan Application Tips: Maximise Your Approval Chances

Securing a working capital loan can make all the difference when your business needs access to fast finance to cover expenses or pursue new opportunities. But, as with any financial lending, approval is never guaranteed. Lenders obviously need to protect their capital investment and need to be sure that they are going to be repaid in full, according to agreed terms. All of which means that even small missteps in the application process can lead to delays or even rejections.

If you have decided a loan for working capital​ is required and are beginning the application process, then it pays to do everything you can to boost your chances of approval. Below we have provided some top tips on how to do just that.

Understand Why You Need The Loan

Before you apply, you need to be very clear about why you need this type of finance. There are a number of good reasons why businesses need working capital. It could be to restock inventory, to bridge payroll gaps or even to fund short term growth. Whatever your reasons, they need to be clear and demonstrable. Documenting your needs up front and tying these into your financial projections will go a long way towards convincing potential lenders you are a serious organisation that can be trusted. It will also help them to establish whether the loan amount you have requested is reasonable.

Get Your Admin In Order

To communicate the financial health of your business you need the correct documents required for a working capital loan​ - and this should all be current and completed. Even small discrepancies with paperwork can cause big delays. That means you should prepare the following documents in advance:

• Last 6 months of business bank statements
• Most recent full set of year end which should include profit and loss statements

Having all these in place and up to date should speed up the approval process.

Enhance Your Credit Profile

Both your business and personal credit score might be a factor in approval. That means before you apply for your loan you should check your credit reports for errors or inconsistencies. Pay off any outstanding debts as soon as possible and try to reduce your credit utilisation ratio. If you still have a credit score that is less than ideal, don’t panic as there are lenders out there that specialise in this kind of loan. However, you should be aware that lower credit ratings do generally lead to less favourable loan terms and repayment plans.

Demonstrate Consistent Cash Flow

Lenders are always looking for assurance that you can repay without excess financial strain. That’s why a track record of consistent cash flow is so important. Many businesses experience seasonal variation but try to highlight the months of positive earnings and client contacts. This will help to ease lender concerns about your ability to repay the loan.

Apply For The Right Amount

As we mentioned above, you need to be clear and realistic about what the loan is for. A requested amount that is either too low or too high will indicate to lenders that you have not done your research. All loan amounts should sit comfortably within cash flow forecasts to demonstrate that you will have no trouble repaying the loan.

Of course, it is also essential that you choose the right lender for you. To discover more about a working capital loan application or to discuss your needs, get in touch with a member of our team here at Century Business Finance.

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