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How to Increase Your Chances of Getting Approved for a Business Loan for Your Phone Case Business

The global smartphone market continues to skyrocket these days. As of February 2020, the number of smartphone users worldwide had already exceeded three billion, and it is forecasted to gradually increase by several hundred million in the following years.

When sales of smartphones increase, the demand for phone cases will also grow with it. Both are almost directly proportional to each other. In fact, one consumer may buy several phone protective cases just for a single smartphone. Hence, there’s no better time to break into the phone case market than now.

If insufficient capital is your problem, opting for a loan can be your go-to solution. Whether you’re starting or continuing a phone case business, here are ways to secure a small business loan for your phone case business.

Have a Rock-Solid Business Plan

A phone case business doesn’t only involve creativity. Like any business, it should come with practicality. Running a business on a practical model requires a solid business plan. If you have drawn up a complete and well-presented plan for your business, you’ll get a realistic view of what can be accomplished within your marketplace at present and in the future.

Similarly, a sound phone case business plan is what lenders would look for. Before granting you a loan, they will have to make sure that your business can continuously generate positive cash flow and is, therefore, a good lending risk. The more realistic and clear your plan is, the higher your loan approval chances are.

In addition to your business plan document, lending companies would have to go through your financial statements. In this case, have the following documents ready upfront:

  • Bank statements
  • Personal credit report
  • Business credit report
  • Copies of relevant legal documents, such as drop shipping contracts or any licenses that permit your business to operate

Highlight your company’s financial position. It should showcase that your company, even though it’s small, is fiscally stable and financially responsible.

Improve Your Credit

The financial documents mentioned earlier are only proofs of your business’ current year-to-date results. The main deciding factor of whether a lender will grant or deny your loan application is still your credit score. If your business has a good credit score, lenders will more likely approve your loan application.

What’s a good business credit score?

  • It can be anywhere between 80-100 based on Dun & Bradstreet PAYDEX, in which 80 indicates timely payments, and 100 indicates early payments.
  • In contrast, for Intelliscore Plus from Experian, a good business credit score should be within 76-100 range.

You won’t have an established and good business credit score if your company is still young or not yet established. If this is the case, lenders will check your personal credit, instead. You’ll be ahead of the game if you have a good personal credit history, but if you have a bad credit score, take some time to improve it first.

Here’s how you can boost your personal credit score.

  • Pay off all your debts.
  • Make payments on time or earlier.
  • Spend under your credit limit.
  • Keep your accounts open.

It’s best to build both your business and personal credit scores. It takes time, dedication, and patience. Also, don’t get worked up with the legitimate bankruptcies or late payments in your credit report.

Alongside other loan application requirements, you can include a letter explaining these circumstances and how they’ve been worked on. There’s no guarantee that the lenders would consider these, but it’s worth the try.

Maintain Positive Cash Flow

Upfront operational costs are common, especially if you’re customizing the phone case yourself. If these expenses aren’t managed well, they can directly hurt your cash flow, which is the last thing you want to happen. If you plan to apply for a business loan, keep your cash flow steady.

Positive cash flow has a great impact on your DSCR or debt-service coverage ratio. DSCR, like your credit, is another deciding factor in your loan application approval. DSCR is a mathematical equation that allows lending companies to know about a borrower’s repayment ability.

Opt for the Right Lender and Product

Sift through all the various lenders and their products. While you may experience multiple credit checks in the process, you can find the financing solution with the lowest interest rates and best terms.

Furthermore, just because a lending company is big doesn’t mean you’ll get a higher approval rate. Smaller community banks are more inclined to financing small businesses than the bigger ones. Before setting up any meetings, make sure to do your research and ensure that the lender will at least review your application so that you won’t waste time.

Takeaway

Whether you’re launching a new startup or inject capital into a growing business, applying for a small business loan is undoubtedly a daunting process. But if your business has a strong plan, a good credit, and positive cash flow, securing a business loan for your phone case business has never been easier.

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