Business loans are one of the most common types of loans out there, and this type of loan is secured with any personal guarantee or valuable asset as collateral. But whatever you are planning to secure the loan with, you promise our lender that you will surely repay the loan at the said time and if you are not able to meet up, the lender can use the collateralized assets or personal guarantee you used to secure the business loans as a payment. To cut the story short in this type of loan you are giving the lender a sense of security that you will repay the loan and if you fail to, they can get their money back with the collateral or guarantee.
Well, the fact that this type of loan is one of the best options on the financing market does not mean there is no process when applying for it. Here are a few tips that can increase your chances of a successful application:
1. What Are You Using as Collateral?
There are two types of collateral, and they are assets that you own and the ones that you still have still loan against. If there is still a loan on the asset you are planning to use maybe a mortgage for a house then the bank will have to refinance your loan from where you have the loan against and claim the title. The perfect asset you can use as collateral is the one that has a title of ownership (and this is the type most lenders want to see) – this means that the bank will only lend if they can get a title back.
2. Maintain Detailed Records of Your Assets’ Value
During your loan process, your lender will be thorough in their assessment of assets, and you should do so as well. They do this because in case you default from the agreement their investment will be secured with the assets you provided as collateral. This is why you need to do your research and know how much your asset is worth in the current market. So, make sure you keep a good record of the asset from the agreement starts and keep accurate financial records.
3. Assess the Risks Thoroughly
The good idea is to run your loan offer past an independent financial advisor once you have one. If you are not a financial expert yourself, it is important that you consider this step. Understanding the risk before you commit yourself its very important.
4. Remember you have the right to haggle
The fact that your lender already states business loan rates does not mean you cant secure a better deal if you are ready to negotiate. So, ask questions and see if you can get yourself some leverage. Remember that is not a must that you get from a particular lender you can always walk away and check another lender.
5. Create a Good First Impression
Two things are essential when it comes to using collateral to get a secured loan, and they are cash flow and capital (note that they are not the only ones). When trying to secure a loan, you have to confuse your lender that you are investable. So, create a good impression when meeting with the lender for the first time.