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5 Ways to Improve Your Business's Chances of Getting Approved for a Disaster Loan

Published June 7th, 2022 by Cornerstone Capital Advisors

With the onslaught of natural disasters in 2021, it's a good idea to know your options.

One of these great options is disaster loan assistance. By utilizing disaster loans, you can help your business get back up and running.

But what if you don't know where to start? What if you're not sure how likely your prospects are for obtaining a loan?

Knowing the answers to these questions can help you optimize your application strategy and strengthen your candidacy for a loan.

So keep reading to learn more. We'll tell you five ways to improve your chances of getting approved for a loan.

1. Show Pre-Disaster Cash Flow

This tip is most difficult to execute for newer businesses. Without at least years' worth of financial documentation, banks aren't as likely to issue out loans on your business's behalf. They want the loan to be able to sustain the already adequate efforts of the business in question.

That's why they usually don't offer SBA loans to very new businesses. Without a lot of documentation of positive cash flow, it's difficult to establish a solid basis for offering disaster loan assistance to your business.

However, they could be convinced if the business owner has had previous, prolific industry experience. In that case, they have better faith in the business's potential for good cash flow.

But there are plenty of businesses that don't have years of cash flow documentation or owners with a ton of industry experience. In that case, one year or even a few months' worth of strong cash flow documentation up until the crisis in question could help.

Keep in mind that the less documentation you have, the stronger the proof should be. So if you've only been open for a few months, you'll want to be thorough and most convincing that your business will put disaster assistance to good use.

2. Provide Enough Collateral

It might also be a good idea to put up collateral. This way, your bank has a contingency to receive the amount they're due even if your business cannot pay it back.

They don't want to take too many risks when financing a business. Securing this contingency will make your business a much safer candidate for receiving this loan.

The amount of collateral you put up will depend on how weak your business's candidacy is for an SBA disaster loan. Once again, the weaker your general prospects, the more you will have to compensate for.

In this case, that means putting up more valuable assets as collateral. Since the collateral will be split between the SBA and the bank, you'll have to put up enough collateral to make up a large part of the loan amount.

3. Prove that Your Business was Affected by the Disaster

Documented cash flow and written dates will provide the concrete context of a disaster's impact on your business. But it's not all of the story. You'll also have to skillfully explain how your business was affected by a disaster.

While you shouldn't wax poetic about your difficulties, you can explain the policy changes, local politics, and other phenomena that resulted in dips in revenue. You'll also have to synthesize financial information on your own accord to further demonstrate that the disaster has presented a unique difficulty to your business's ability to generate revenue.

4. Raise Credit Score

Even loans that don't specify credit criteria will usually run a credit check anyway. Most banks will most likely only give out loans for those with a score of 600 or higher. So if your business has a credit score lower than that, then it may be time to start raising it.

But even if you do, some loans ask for a higher credit score than others. Others may not need as high of a credit score. Raising your business's credit score may be difficult, especially during a time when you need money, but letting some go to pay off some debt can help you secure a lot of financial relief.

Pay back some utility bill debt, add trade references to your company's credit file, and double-check your file to correct and dispute any mistakes. There are plenty of tactics you can employ to give yourself even a slightly better chance of securing a loan.

5. Ask for More

As counterintuitive as it sounds, it's best to ask for more money on your disaster loan assistance application. This doesn't mean that you should treat the number as a free-for-all. Banks still calculate how much loan money a business might need to sustain operations, anyway.

But they're unlikely to offer loans of small amounts since that indicates that a business does not need much assistance. Instead, they'll offer, albeit selectively, large loans to businesses that are truly in need.

So don't be too humble when filling out your disaster loan assistance application. Ask for the amount you need to ensure that all your operational bases are covered.

Get the Disaster Loans Your Business Needs

When a crisis devastates your business's finances, it's time for plan B. By applying for disaster loans, you can make sure that all of your hard work can continue without the looming threat of financial collapse. So make sure you optimize your chances of securing the best financing options!

At Cornerstone Capital Advisors, we're dedicated to helping people understand their financial options. That's why we offer consultation services to help businesses perfect their disaster loan application strategy. So if you're dedicated to your business's post-disaster financial recovery, contact us today!


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