Common Loan Mistakes and How to Avoid Them
Whether you’re expanding a home-based bakery into a storefront or buying new equipment for your growing salon, applying for a small business loan can feel both exciting and intimidating. While the extra capital can help you reach your goals faster, it’s also a commitment that requires careful planning and thorough preparation.
“A lot of people think, ‘I just need the money, so I’m going to fill out the basics,’” says Janiece Stewart, Michigan Women Forward Loan Officer. “But not giving us complete or accurate information can really slow down — or even derail — the process.”
Below are several pitfalls Stewart often sees, along with insights on how to avoid them so you can confidently move forward with your financing needs.
1. Incomplete or Omitted Information
One of the biggest stumbling blocks is simply leaving blank fields on the application. Whether it’s personal financial details, business revenue figures, or projected expenses, failing to provide everything requested can bring your loan process to a halt.
“We ask for the information for a reason,” Stewart explains. “Even if a question seems trivial, please fill it in. It helps us see the full picture of your business and identify areas where you might need extra support.”
How to Avoid It
- Read the instructions carefully: If you don’t understand a requirement, reach out to your business development manager or a local business resource for clarification.
- Provide supporting documents: Upload tax returns, bank statements, and any additional documentation (like lease agreements or business licenses) that verify your information.
2. Not Understanding Your Own Business Finances
You may be a master of your craft — whether it’s baking, consulting, or providing specialized services — but that doesn’t automatically mean you’re a pro at financial management. Many entrepreneurs struggle with reading financial statements, preparing accurate projections, or pinpointing every expense.
“At Michigan Women Forward, we want to see that you have a realistic handle on your revenue and costs,” Stewart notes. “If you expect to earn $100,000, we want to know how many products you’ll sell, what each costs to make, and the market channels you’re using. Break down every assumption.”
How to Avoid It
- Seek expert help: Tap into resources like SCORE (Service Corps of Retired Executives) or the Small Business Development Center (SBDC) to learn how to create realistic budgets and forecasts.
- Analyze costs thoroughly: Don’t forget rent, delivery fees, credit card processing fees, and other day-to-day expenses that can add up quickly.
3. Rushing the Process Without a Clear Plan
Sometimes, entrepreneurs want funding immediately — yesterday, if possible. They may request a large sum for major expansion, like buying a significant amount of inventory, without ensuring they have the necessary financial underpinnings.
“You might be able to source and store the inventory, but if you haven’t thought through your cash flow, market demand, or other costs to operate, you could be jeopardizing the entire business,” Stewart cautions.
How to Avoid It
- Craft a solid business plan: Outline your short-term objectives, long-term goals, and concrete steps to reach both.
- Give yourself time: MWF conducts thorough underwriting to help ensure you’re set up for success. Be patient and be prepared to answer additional questions or supply more documentation.
4. Providing Inconsistent or Inaccurate Details
Inconsistencies can range from honest typos and overlooked expenses to failing to mention a personal loan or debt. Because MWF delves deeply into your overall picture, missing or conflicting data inevitably raises red flags.
“We do ask some questions repeatedly, which helps us spot discrepancies. It’s not about catching you out — it’s about making sure we fully understand your situation,” Stewart says.
How to Avoid It
- Double-check your figures: Ensure your tax returns, bank statements, and projections line up with each other.
- Be transparent: If you’re not certain about a particular figure, note that and ask for guidance instead of guessing.
5. Lack of Responsiveness During Underwriting
You’ve turned in your application — great! But if MWF (or any lender) follows up with questions and you’re impossible to reach, your application could linger indefinitely.
“We might request extra paperwork, like a lease agreement or a liquor license, depending on your business type,” Stewart explains. “If you don’t respond to emails or calls, you’re simply delaying your approval.”
How to Avoid It
- Check your email regularly: Make it a habit to look for communication from your loan officer.
- Be proactive: If you know you’ll be unavailable for a period (travel, family emergency, etc.), let your lender know.
6. Mistaking ‘Not Now’ for a Final ‘No’
Even if MWF or another lender decides you’re not currently in a position to take on a loan, that doesn’t mean the door is closed forever.
“If we can see that adding more debt right now would hurt your business, we’ll say ‘Not now’ and offer steps to improve your financial health,” Stewart explains. “We look at personal credit, too. If it’s under 600, we might advise enrolling in a credit restoration program while your loan is being underwritten.”
How to Avoid It
- Stay open to feedback: Use constructive advice from your loan officer to strengthen your business plan or credit profile.
- Reapply when ready: Once you’ve completed the recommended steps — such as credit repair or refining your budget—there’s often a path toward eventual approval.
How MWF Can Help
Unlike traditional banks, Michigan Women Forward invests time in helping you build a sustainable enterprise. Loan officers like Stewart work closely with applicants, digging deeper into your numbers and your vision to ensure that funding truly benefits your bottom line.
- Pre-Application Guidance: MWF’s business development managers can help you understand the required paperwork and answer preliminary questions.
- Loan Readiness Assistance: MWF can point you toward local and statewide programs, such as the Michigan SBDC or Operation HOPE, for mentorship, financial education, and credit restoration. MWF staff may also assist you with revising financial projections to be more consistent with your business plan and industry trends.
- Ongoing Support: Once approved, MWF continues to offer post-loan technical assistance, helping you utilize your funds effectively and manage your repayments.
A little preparation goes a long way. Before filling out that loan application, invest time in mapping your finances, creating a realistic business plan, and gathering all required documents. And remember, a “not now” isn’t necessarily a “no” forever — often, it’s an opportunity to refine your approach and come back stronger.
“Don’t be afraid of the loan process,” Stewart encourages. “There’s plenty of help available. With the right plan and the right resources, you can secure the funding you need to watch your business thrive.”
