While there are numerous lending institutions, not everyone qualifies for a loan.
It starts with setting out the purpose for the loan and determining the amount required to enhance liquidity.
Accurate estimations show credibility in the business transactions.
Nearly all lenders will look at the credit score before approving a loan request.
Other factors that influence the approval include:
The credit score:
Having a bad credits score makes one a high-risk customer that might default the loan before maturity.
Raising the score above 650 remains acceptable across most banks but does not guarantee automatic approval.
Most lenders hold out for a credit score in the range of 700-800.
Debt income ratio:
Most credit facilities are keen to adhere to the federal lending guidelines.
In personal loans, the repayment installments need not exceed 33% of the gross monthly income hence capping borrowers based on their earnings.
Cash flow:
In finance, higher operating cash margins helps businesses survive slow economic growth and ensure long-term growth.
The lenders consider a business’ cash flow as it indicates the capacity to repay the loan without default.
Industry Risk:
While most companies have no direct input of the industry risk, the industry rating is likely to affect loan eligibility.
The SIC codes are ranked to determine the level of risk each industry carries.
