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Applying for a Loan? Don’t Let These Common Mistakes Get in Your Way

Whether starting or expanding a business, capital is key. If you’re planning to approach a bank or similar institution for funds to back your idea or finance your growth, you’ll need a solid loan application in hand – one that can weather a thorough review.

Make no mistake – most lenders perform detailed assessments of business loan applications before deciding to approve or decline. And in many cases, it takes little more than missing, erroneous, or unclear information for a funding request to be denied.

Don’t let these common mistakes get in the way of securing the loan your small business needs.

Weak Business Plan

Lending institutions need to be able to examine your goals and evaluate your company’s target market. Performing and presenting this research in the form of a detailed business plan not only demonstrates that you know where you’re going - and understand how to get there - it lets lenders gauge how likely that journey is to generate revenue.

Banks can’t rely on loan interest income if the ventures they support run the risk of collapse. It’s up to you to convince your loan source that monies invested will be repaid on time and in full. The best way to accomplish that is with a business plan that illustrates clear and realistic projections for revenue growth.

Chaotic Financial Records

Most financial institutions will want assurance that your business is stable before agreeing to lend you money. And they’ll be counting on the figures from your financial statements to provide them with information about your company’s capacity to support loans and other debt commitments.

Presenting accurate, organized, up-to-date balance sheets, cash flow statements, and other pertinent business records allows potential lenders to assess your current financial situation and extrapolate future monetary trends.

Vague Funding Strategy

Most lenders need to know exactly how their funds will be spent before they can decide whether or not to advance them. Take some time to clearly explain how your business will benefit from a proposed loan, and whether that money has been earmarked for:

  • inventory purchases,

  • specialized equipment to increase production,

  • advanced or customized software to help business processes run more efficiently, or

  • employee hires or outsourced assistance that will improve sales and marketing results

Not only will your benefactor be looking for a positive impact on business performance, they’ll want to weigh your specific financial needs against the loan amount you’re applying for. You should make sure there’s a good match between funding purpose and the type of loan you’re requesting.

Overlooked Credit Issues

Do you know what the status of your credit rating is? Keeping an eye on your personal and commercial credit reports makes good financial sense any time. But it’s even more important when you’re planning to apply for a loan.

Lending institutions will check your credit history to evaluate outstanding debt, and to determine your capacity and track record for making payments. The better your credit rating, the better your chances of having a loan approved - and the faster that approval is likely to happen.

You should bear in mind however, that every time a credit check is run, it gets flagged as an inquiry on your credit report. Too many inquiries can reflect badly on your credit score. So make every loan application count by providing the lender with complete and accurate information, avoiding common mistakes - and ensuring the details on your credit reports are accurate before you apply.

Leaving It Too Late

Don’t wait until a financial crisis rears its ugly head before initiating a loan application! Desperation can lead to poor decision-making – and may have you accepting less than favourable loan terms or interest rates.

When you have a plan for the direction and growth of your business, it will help keep timing intact where requests for capital are concerned. Funding applications will also prove more successful if you leave adequate time to find the best deal, connect with an appropriate lender, and gather the supporting data that will get your loan approved.

Of course, it goes without saying that reading and verifying the terms of a loan agreement is a must before putting your signature to it. Make sure that what you originally applied for is what’s being offered. And don’t be afraid to ask questions if there’s anything you don’t understand.

Remember: every debt you take on - whether short or long term - carries financial implications for your business. It’s in your best interest to ensure those implications are clear and make sense for the future success of your venture.


This article is intended to be a guide only. None of the comments contained in the article are intended to be advice, whether legal, financial or professional. You should not act solely on the basis of the information contained in this article because many aspects of the material have been generalised and the tax laws apply differently to different people in different circumstances. Further, as tax and related laws change frequently, there may have been changes to the law since this article was published. Specific advice should always be obtained from a tax professional.

Symmetry Accounting & Tax

The Small Business Specialists

Our Office

11 Fellbridge Way


WA 6147


PO Box 63


WA 6953

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