There is something more overwhelming and disconcerting about applying for another business loan. Another means that this isn’t your first foray to the lenders. They’ve seen you before, and they have heard your business pitch before. While they wanted to be a part of your business before because you have tangible goals and quality products, they may not be as sure now because time has passed, and you haven’t fulfilled some of the milestones that you said you will.
Many entrepreneurs thought that it’s hard to get approved for that first loan. What they’re missing out on is how much harder it is to get approved for a second loan. Remember that when you applied for the startup capital, all you have are proposals—pitches, plans, prototypes, etc.
You have so much hope for the business because that’s what you’re relying on—plans. Whether they are realistic or not depends on who looks at them. That’s why some risky angel investors would choose to risk their money on startup tech companies. You sold them to the idea.
How Different Is the Expansion Loan?
Why is the second business loan more challenging than the first one? By now, you should’ve already proven yourself. Despite the fact that your business hasn’t been around for a long time, there is data to be culled and analyzed. The lenders will look into what you have achieved over the past years and whether your business is due for another round of loans. What do you have to show up for it? Have you had a return on investment (ROI) already? Did you pay back that first loan?
There are many ways to qualify for another round of loan depending on your industry and where you initially sourced your capital. Companies that started with venture debt now abound, thanks to angel investors. Many venture capital funds are operating in countries like Singapore, making it easier for the Asian market to tap such resources. However, before you plan how to expand your business, think first about how you’re going to convince investors that your company is ripe for an expansion?
Pay Your Taxes Diligently
Before you think about applying for a loan, set a meeting with your accountant and look at your taxes. Have you been paying them diligently? Tax evasion is a serious offense and can cause your company’s closure. This is the first thing that lenders will look into if they want to invest in your business. They will want to make sure that they’re putting their money into a law-abiding organization. No lender wants to lose money just because the business he/she invested in didn’t want to pay the correct taxes.
Prepare Your Income Statement
Another document that lenders will want to see is your income statement. How much are you earning and how much are you spending? These things matter because the lender needs to know if you can afford the expansion you are eyeing. Yes, this is your risk. You are taking it upon yourself to risk the business that you’ve worked hard for. However, lenders have the right to say “no,” too, if they don’t feel like you can repay the loans. You will have a better chance of qualifying for the loan if you can show that your business is earning.
Show Your Business Plans
If you want to expand your business, then you have to show your plans to the lenders and investors. The primary reason why you’re applying for another loan is to reach more of your audience and produce better quality products, right? So, why not show that to the lenders? They need to see your goals in order to determine if you’re eligible for the amount that you are applying for.
The idea of presenting a business plan shouldn’t come as a surprise. You have already done this when you asked for capital to start your business. This time, you have something to show them. This business is not a prototype anymore. You’ve done the work and there are measurable results. Lenders and investors will rely on those results.
Do not be afraid to bring your business to the next level. Applying for another loan should just be a step you need to take. Why should you be scared when you’ve already done the impossible, which is to bring your idea from a concept into an actual business? People are buying your products and subscribing to your services, aren’t they? That should be enough push for you to take another plunge for your business.