May 28, 2025 By Tom Meyer

Securing a business loan may be a game‑changer, helping fuel expansion, smooth cash‑flow, or unlock new opportunities. Yet many owners stumble during the application process, costing valuable time, money, and momentum. Below are four common missteps and ways to help keep your financing journey on track.

Applying before your financials are lender‑ready

The mistake

Rushing to submit an application with incomplete or inconsistent financial statements. Missing tax returns, outdated profit‑and‑loss reports, or unexplained fluctuations in revenue often trigger red flags that slow or prevent approval.

Why it happens

Entrepreneurs wear many hats. When an opportunity pops up - a new location, bulk‑inventory discount, or busy season - the instinct is to apply immediately and "sort out the paperwork later." Unfortunately, lenders decide now based on the numbers you provide.

Tips to keep in mind

  • Close your books monthly. Consistent bookkeeping helps ensure you are able to  produce up‑to‑date statements on demand.
  • Reconcile discrepancies early. If revenue dipped or expenses spiked, consider adding footnotes that explain the one‑off events.
  • Create a lender packet. Assemble two years of tax returns, year‑to‑date P&L, balance sheet, and 12‑month cash‑flow projection before you click “apply.”
  • Lean on professionals. A CPA’s review letter may add credibility and help catch errors.

Pro tip: For SBA loans, anticipate that lenders will request interim financials if more than 90 days have passed since year‑end statements.

Underestimating (or overestimating) how much you need

The mistake

Borrowing too little and running out of funds mid‑project, or borrowing more than necessary and paying interest on idle cash.

Why it happens

Optimism bias leads owners to low‑ball project costs. Fear of rejection does the opposite: some pad the request "just in case." Either scenario generally communicates to lenders that you haven’t fully planned.

Tips to keep in mind

  • Create a detailed use‑of‑funds list. Break down every cost, including equipment, build‑out, inventory, marketing, contingency.
  • Add a realistic buffer and  justify the figure in your plan.
  • Align loan term with asset life. Don’t finance a five‑year marketing campaign with a ten‑year loan.
  • Stress‑test cash flow. Model best, expected, and worst‑case scenarios to help ensure you are able to service debt.

Pro Tip: Lenders generally love specificity. "We need $275,000: $200K for machinery, $50K for installation, $25K contingency" typically beats a round "$300K for growth."

Ignoring personal credit and collateral requirements

The mistake

Assuming the business’s performance alone will secure funding. 

Why it happens

Owners often separate their personal and business finances mentally. Lenders don’t; they evaluate the character and capacity of the guarantor(s) behind the business.

Tips to keep in mind

  • Check personal credit early. Review reports from all bureaus and dispute inaccuracies. Pay down revolving debt to lower utilization.
  • Build business credit. Obtain a DUNS number, pay vendors on time, and monitor your business credit profile.
  • Understand collateral expectations. Prepare updated schedules of assets.

Pro tip: A concise personal financial statement, signed and dated, may help speed up underwriting and generally signals transparency.

Shopping for rates, not relationships

The mistake

Focusing solely on the lowest headline rate and submitting multiple applications indiscriminately. This may trigger hard inquiries, confuse underwriting, and fracture valuable banking relationships.

Why it happens

Online comparison sites make it easy to chase "best rates" without context. Yet small differences in APR may pale compared to flexibility, speed, and advisor support.

Tips to keep in mind

  • Pre‑qualify first. Use soft‑pull tools to gauge eligibility without impacting credit.
  • Compare total cost of capital. Evaluate fees, prepayment penalties, and covenants—not just rate.
  • Prioritize fit. A lender who understands your industry and offers consultative guidance may save headaches later.
  • Build a long‑term partnership. Consistent communication with a relationship manager may result in easier access to future funding.

Pro tip: Ask potential lenders how they’ve helped businesses like yours during downturns or rapid growth—real stories reveal partnership quality.

Prepare today, borrow smarter tomorrow

Avoiding these four common mistakes boils down to preparation, realism, and relationship‑building. By tightening your finances, sizing your loan accurately, managing credit proactively, and choosing lenders strategically, you may help position your business for faster approvals and better terms.