Borrowing money for business is a common practice and banks and other alternative lenders have developed customized borrowing solutions for various businesses in a wide range of sectors. If you are thinking of stepping into a bank for a business loans, there are a few things you will need to keep in mind. The risk of lending money in the current economy is relatively high and banks won’t just lend to anyone. The great thing is that there are 4 very definitive factors that can tilt the loan decision to your favor. These are the four most important indicators that your business has the potential to grow, make money and pay the debt. Here they are:
Potential Market Size
What is your current market size? How big can it be and what are the challenges? This is a massive question that has to be answered. The revenue of any business comes from the sale of their products or services. If the market size they are selling to is big, it means they are making more money. And that is not all. You may have a small market size at the moment but there is potential to expand through more marketing investment. These are the kinds of businesses lenders will be looking for because they know there is enough revenue upside for the loan to be repaid back.
Background and Expertise In The Industry
The lender will also want to know that you have some background and expertise in the industry you are operating in. Take this example. Let’s say you want to start an auto repair shop in a big city like Oslo, you need to demonstrate to the lender that you have the expertise needed to survive in this sector. If you are not a mechanical engineer, perhaps you can bring in a team that has that ability. In most cases banks will be attracted to businesses that have expertise and experience in the area they are operating in.
Effective Business Model
An effective business model is defined as a model that optimizes revenue. When you are running your business towards success, you cannot afford to leak cash. You also need to identify and explore all potential revenue streams in your current market and expand into new potential markets. An effective business model must also inspire customers to make more than one purchase and return to buy in the future. If that’s the case, your loan request will be more attractive to banks and other lenders.
Financial performance is often assumed as the most important thing for lenders but it’s really not the only thing that matters. You can have good financial performance and still miss out on a loan. However, it’s still a plus to have it and if you can complement good financial performance with other positive business attributes, you will have an easy time landing the loans you want.
These are basically the four things that matter when it comes to business loans. You can visit Nordax Bank today for more details.