Kenny Salas
By: kennysalas
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3 Tips for Becoming a Better Borrower

There are plenty of healthy and growing small businesses that find it difficult to access affordable financing. From the lens of a lender, the current state of your business is as important as your history in the business. It is vital that you employ the best practices to manage your business. Here are a few tips that will help you become a better borrower today or improve your chances of getting a loan in the future:

1. Keep your financials in order

Having organized financial records is crucial to get a small business loan. Lenders typically request two to three years of your financial statements, including profit & loss statement, balance sheet, and cash flow statement. These are used to assess the historical financial performance of your business and provide visibility of your capacity to pay off debt in the future. Get your financials in order: buy an online accounting software and hire a professional accountant. While this may seem like an unnecessary cost in the short-term, it may cost you more in the long-run.

2. Actively manage your cash flow

Lenders typically request monthly bank statements to see your average cash balance and ensure you do not have negative days on your account. They are looking for history in which you demonstrate your ability to effectively manage cash and leave cushion to cover unforeseeable bumps in the roads. Furthermore, it is important that you demonstrate your ability to predict cash flow in the short-term. Lenders not only want to see your history but also get visibility of future cash flows. A strong track record and forecast of cash management prove to lenders that you fully understand the cash flows of your businesses. It also proves that you can clearly identify the cash you can and cannot manage.

3. Keep a good and transparent relationship with your lenders

If you manage your relationship well with your lenders, they can be your best friends in the worst of times. The key to having a strong relationship with your lenders is to stay in touch with them even when you do not need them. If you are currently a borrower, give your lenders periodic business updates. This enables you to forewarn them of any rainy days and may help you get more support to endure the storm. Even if you do not need a loan today, you should start forging a relationship with lending agents as they can start counseling you on how best to position yourself for a loan in the future. Not sure about how to start a relationship with your banker? Start with these three simple tips.

The irony of the credit world is that it is easier to get financing when you do not need it. Make sure you follow these and other best practices today to avoid losing the opportunity to fund the future growth of your business.

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