At Become, we specialize in helping businesses secure loans through our extensive network of lenders across the US and Australia. Navigating the loan application process can be daunting, but understanding the key factors that lenders evaluate can empower you to enhance your chances of approval. Here are some critical elements that lenders consider when assessing a loan application:

Dishonours

Definition: A dishonour occurs when a check you deposit bounces or a direct debit fails due to insufficient funds. High dishonour rates can negatively impact your loan eligibility.

Best Practices:

• Regularly monitor your account balance and set up alerts for low funds.
• Consider overdraft protection to avoid missed payments.
• Maintain a proactive approach to your finances to ensure a positive banking history.

Monthly Revenue

Definition: Lenders analyze your business’s average monthly revenue over the last three to six months to gauge financial stability.

Best Practices:

• Use free online tools to improve marketing, manage finances, and enhance productivity.
• Keep business and personal accounts separate to streamline your financial management.
• Set measurable goals each month to drive growth and increase revenue.

Credit Score

Definition: Your personal credit score, particularly relevant for US businesses, reflects your creditworthiness. Scores range from 300 to 850, with higher scores leading to better loan offers.

Best Practices:

• Aim for a credit score above 700 for optimal loan terms.
• Reduce outstanding debts and avoid high credit utilization.
• Regularly review your credit report for errors and resolve discrepancies promptly.

Bank Balance

Definition: The average daily bank balance indicates your business’s cash flow and ability to meet loan obligations.

Best Practices:

• Maintain a consistent and sufficient daily balance over the past six months.
• Use budgeting tools to keep track of expenses and ensure healthy cash flow.

Monthly Deposits

Definition: Lenders look at the average number of monthly deposits to assess business stability. A diverse client base is favorable.

Best Practices:

• Increase the number of deposits by encouraging prompt payments from clients.
• Deposit cash regularly to strengthen your financial profile.

Non-Sufficient Funds (NSF)

Definition: An NSF indicates that a payment attempt was unsuccessful due to insufficient funds, which can raise red flags for lenders.

Best Practices:

• Limit NSFs by maintaining sufficient balances and planning for expenses.
• Set up reminders to manage payments and avoid fees.

Business Age

Definition: The length of time your business has been operational is a key factor in loan eligibility. Established businesses tend to have a better chance of securing funding.

Best Practices:

• Wait at least six months after acquiring a business before applying for a loan to build a stronger financial history.
• Utilize accounting software to track cash flow effectively.

Negative Balance Days

Definition: The average number of days your account balance was negative is a crucial metric for lenders assessing your financial reliability.

Best Practices:

• Aim for zero negative balance days by managing expenses and cash flow.
• Avoid transactions that could incur multiple overdraft fees.

Existing Business Loans

Definition: Lenders evaluate your current debt obligations, including existing loans and lines of credit, to assess repayment capacity.

Best Practices:

• Reduce existing debt where possible to improve your financial standing.
• Ensure timely payments on all loans to build trust with lenders.

At Become, we understand that securing a business loan involves various financial considerations. By focusing on these key factors and implementing best practices, you can enhance your business’s appeal to lenders. Whether you’re looking for funding to expand, invest in new projects, or cover operational costs, we’re here to guide you through the process and help you achieve your financial goals. Let’s work together to make your funding journey as smooth and efficient as possible.