Work it Step-by-Step to Get a Better Business Loan

 

If you’re a new business owner looking to take out a loan and apply for a merchant cash advance, you might be disappointed by the offers on the table -- especially if your credit is less than spotless. However, sometimes taking on a more expensive loan than you’d hoped for is a necessary evil to grow (or launch) your business. The smaller loans you qualify for now can lead to larger, less expensive loans in the future.

How can you graduate to a better business loan down the road? Here’s your step-by-step guide to finding a lower-cost Merchant Cash Advance that fits your needs.

Step 1: Use your current loan to become an ideal borrower.

The loan you qualify for now will not only help you grow your business but also can position you as an ideal borrower in a future lender’s eyes. Of course, that depends on your using the loan responsibly. 

If your credit score or short time in business precluded you from better terms, use this first, more expensive loan to build up a history of good habits.

Stay in business.

It's obvious but crucial. The longer you remain in business, the less risk you pose to lenders. A new or young business hasn’t yet been tested. A more established company has proven it can withstand the regular ups and downs of its industry and the market environment and easier to fulfil merchant cash advance loan application.

Pay on time.

This may seem obvious, but for some borrowers, paying on time is tough. Every time you make a loan payment exactly when it’s due (or before, if you can swing it), you’re establishing a track record of on-time payments. This is the most important step you can take toward building up your credit score.

Build your bank balance.

If possible, try to pad your bank balance as you use it and pay off your first loan. Your average bank balance has a huge impact on the types of financing you'll qualify for later on.

Monitor your credit score.

As you make your business-loan repayments on time and in full, you should start seeing your credit score increase as you build on good behaviour. Be sure to monitor this progress so you'll be aware of any errors on your credit report -- it happens more often than you'd think. If you uncover an error, report it. Mistakes here can seriously hurt your credit score and limit your options in the future.

Avoid risk indicators.

Certain things are bright red flags that will prevent you from working with premium lenders. Steer clear of net losses, account overdrafts, late payments and slow accounts-receivable turnover.

Stay within the terms of your agreement.

Beyond making your payments on time each cycle, make sure you stay within the terms of your initial loan agreement. Don't take on a new merchant cash advance application while the loan is still in service, and never use the capital for unqualified purchases. Read your loan agreement in full before you sign on the dotted line.