Do Banks Use Debt to Income Ratio to Determine Approval for a Line of Credit
The world of business moves too fast to spend time waiting for endless approvals. Therefore, you need to know what it takes to be approved for a business bank loan and how banks use debt to income ratio in their decision making process.
Most small business owners think only about credit score and collateral when applying for an instant business loan. However, numerous other factors come into play, such as debt to income ratio. Learn more about this vital measurement and how it can both help and hurt your business.
How Do Banks Use Debt to Income Ratio to Determine Approval
Before you apply for a short term business loan, it’s important to think like a lender. What factors will they consider in their funding decision? Will you be able to repay the loan? One crucial tool the banks look at is your debt to income ratio.
Your cash flow management is a huge factor banks use to determine whether you are suitable for a business bank loan. It helps them figure out if you will be able to repay the loan and if you are a good credit risk.
Debt to income ratio is calculated by adding up all your personal debts and dividing that number by your monthly gross income. Then, multiply the resulting number (which should have a decimal) by 100 to come up with a percentage. To be attractive to a traditional lender, your number should be less than 35 percent. And yes, a bank will be very strict about that ratio.
Where Can You Go for a Line of Credit without Hassles?
On the other hand, alternative lenders like Financing Solutions (www.financingsolutionsnow.com) will be much more accommodating and are geared towards giving a line of credit based on much more flexible standards. They look at your whole business to make funding decisions.
At Financing Solutions, they consider your credit and borrowing history and the profitability of your business. Even if you have less than perfect credit, you are still eligible for their short term business financing.
They work with small business owners exclusively, so they understand your challenges and struggles. Therefore, they give you business cash now, typically in less than 48 hours.
How to Encourage Customers to Do Business with Your Company
In business, the bottom line is: no customers, no business. Bringing more prospects to your doorstep is the key, but this is easier said than done. You must encourage customers to choose you over the competition. These tips may help.
Having exceptional customer service is the most important thing you can do, but so many businesses get this wrong. This leaves the door open for you to swoop in and demonstrate that you do it right. Answer complaints promptly, fix any issues with your product and genuinely talk with your customers. They will be sure to tell others of their experience, building your positive reputation and profitability.
You must also make it easy to do business with your company. Be available during the hours that are convenient to your customers. Offer samples or how-to demonstrations if appropriate. Use technology to connect and offer customers a seamless, effortless way to work with you. They will keep coming back.
The most important factor is to focus on your business instead of your money problems. With help from Financing Solutions, you can get the fast business capital necessary to grow and thrive.