mistakes to avoid when applying for a business loan
When filling out a loan application, you need to give potential lenders insight into your business finances. This includes cash inflow and outflow. Yet many small businesses misrepresent these numbers in their applications. While you may think that inflating your income and minimizing expenses will make your business look more profitable, this usually works against you. “Lenders have a vast knowledge of industry and can also review the applicant’s bank account transactions,” says Marsha Kelly, small business blogger and serial entrepreneur at Best4Businesses.com. “If the bank suspects the figures are inflated, it’s a red flag about the owner’s dishonesty and often results in loan refusals.” In these scenarios, honesty is always the best policy. “Most lenders are likely to overlook a small financial ‘hickey’ or misstep in the past, however no one will tolerate deception,” says Stewart J. Guss, Attorney At Law. “If you’re honest and fully disclose and explain any past issues, you still have a good chance of acquiring your loan.” He also notes that dishonesty could result in worse than just a loan refusal. “If there are any legal issues down the road, and you have misled or deceived the bank in any way, you may have subjected yourself to potential civil or even criminal liability for fraud,” Guss says.