Securing a business loan is perhaps one of the most stressful moments of time for entrepreneurs throughout America, regardless of the region. However, a recent study conducted by Biz2Credit.com has identified New Jersey as the top state for loan approval rates, according to a new study of more than 50,000 loan applications nationwide over the last 12 months.
New Jersey-based entrepreneurs had nearly one-quarter of their loan requests (23.4%) approved and handily paced the Top 10 in the study with the neighboring State of New York placing second as 19 percent of entrepreneurs’ loan requests in “The Empire State” were approved.
Business owners in “The Garden State” have the unique combination of high average annual revenues and credit scores with a close proximity to two of America’s biggest cities. Although the state is sandwiched between New York and Philadelphia, New Jersey-based businesses have much lower overhead costs while still enjoying the benefits of a high volume of traffic.
The high operating costs of running a business in New York City, which had the lion’s share of loan requests, had an adverse effect on entrepreneurs seeking funding. Businesses in New York City, however, typically have higher revenues, credit scores and are in business longer, which bodes well during the application process.
The Top 10 States for Loan Approval Rates in America, according to Biz2Credit, are:
- New Jersey (23.4%)
- New York (19%)
- Illinois (15%)
- California (14.2%)
- Pennsylvania (12.9%)
- Florida (11.1%)
- Georgia (10.2%)
- Texas (10%)
- Ohio (8.8%)
- North Carolina (7.9%)
The numbers show that even in the top state, the majority of applications are rejected. Fortunately, there are a number of ways entrepreneurs can improve their chances of securing funding. Following these tips will help any small business owner increase his or her odds of getting financing from lenders.
Build Your Credit Score
Many banks, especially the big players, will automatically disqualify a small business loan request if your credit score does not meet the benchmark 600 number. This means that entrepreneurs will have to opt for other options. Be sure to make payments on time and do what you can to reduce the current balances on any credit cards and other lines of credit. Maxing them out can have an adverse effect on your credit scores. If there are any delinquent accounts, they should be attended to first.
Improving your credit score will provide you access to lower cost financing options.
One of the most important steps that anyone should take before applying for a business loan is to get your financial statements in order. Most lending institutions will want to see the last three years of statements, if available, to determine an entrepreneur’s creditworthiness. Now that we are months removed from the 2016 tax return filings, that will likely be the top document that lenders will want to see. If you’ve fallen behind or need to get your financial statements in order, it isn’t a bad idea to consider hiring a bookkeeper or leveraging the accounting services of an outside firm. Not only will getting organized improve your chances of securing a loan, but it will boost the effectiveness of your operation.
Boost Your Cash Flow
Banks and other lending institutions will want assurance that applicants are able to pay off debts. If you are planning on applying for a loan in the near future to grow your business, it is a good idea to do as much as you can to boost your revenues and pay down any current debt in the months leading up to the application.
One of the biggest mistakes entrepreneurs make is trying to take a loan when their company in dire straits. Not only is it harder to get approved for a loan when your business is in that state, but it will come at a higher price.