Borrow Money When You Don’t Need It

How to make it easier to get a bank loan for your business.

Banks make money by lending money. So, if you do need a loan in the future, your bank will welcome your business, right?

Not necessarily. Here’s why:

The bottom line on getting a business loan has little to do with how long you’ve been a bank customer or how nicely you smile. When a bank evaluates a loan application or line of credit request, the only thing they are interested in is whether you’ll be able to repay the loan and make the payments on time.

If you’re already having a tough time paying your bills when you try to get a loan, you may look like a bad credit risk. The lending institution may worry that even with the loan, you won’t be able to bring in enough business and cash quickly enough to pay back the loan on time.

Furthermore, if you’ve never borrowed for the business, there won’t be any business credit history to give lenders any confidence in your likeliness of repaying the loan, either.

Solve the problem before you dig yourself into a cash hole: Borrow when you don’t need it and repay the loan to establish credit history. Then, borrow a little more money and pay it back. If you’ve established a line of credit, borrow against it, pay it back, then ask for a slightly bigger line of credit. Your goal: to get to the point where you’ll have enough credit available to carry your through temporary downturns or help you through growth spurts.

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