Top Loan Mistakes to Avoid
There are many mistakes that can cause a loan not to be approved and can be easily avoided. Below are some of the top mistakes that borrowers can avoid.
1. Incomplete or inaccurate financial documents
Lenders rely heavily on tax returns, business financials, and personal statements. Providing full files of these documents and making sure the numbers are consistent can help prevent delays and concerns.
2. Not showing enough liquidity
Even when the deal is strong, most lenders want to make sure their borrowers have enough liquidity after the loan closes. Majority of the lenders will provide working capital for the subject business, but they want confirmation that the individual owners have their own liquidity to support their cost of living after the loan closes.
3. Overestimating projected revenues
Projections that look unrealistic or overly optimistic often raise red flags. Staying conservative and supported by data helps build lender confidence.
4. Poor explanation of credit issues
Past late payments or high credit utilization aren’t always deal-breakers. A simple, honest explanation strengthens your application.
5. Not preparing a strong business plan
For acquisitions, startups, or expansions, lenders want to see a clear plan showing how you’ll operate, grow, and repay the loan. A weak or vague plan slows the approval process.
6. Choosing the wrong loan structure
Seeking the wrong loan type can affect interest rates, collateral, and other terms and conditions. It’s important to match the structure to your goals.
7. Waiting too long to address lender requests
Underwriting often requires follow-up items. Fast responses keep your file moving and prevent delays for you meeting your deadline for financing.
The team at Blue Water Capital Advisors knows how to mitigate all of the above concerns since we have extensive banking experience. Our team has over 20+ years of commercial banking experience and has significant knowledge of the SBA’s policies. If you have any questions related to this or need any financing, feel free to reach out to us.