For a business to keep on operating, or to get off the ground, it must have financing that is often in the form of a loan. Small businesses can apply for commercial loans in banks or maybe other financial institutions such as credit unions. Typically, banks make loans for the ongoing businesses and not to start-ups.Such reasons make applying for a business loan to be stressful and overwhelming. However, lenders only want to understand your business ability to repay debt and to know your small business in-depth. In this piece, we have exact and essential steps to follow to apply for a business loan successfully.
Prepare for the small business loan search
First, you need to be sure this is the appropriate time for your small business to apply for a business loan. Ask yourself whether you have adequate time to invest in this overwhelming process. Are your business credit score and credit history where you want them to be? Do your business financials look great right now?
It is always wise to apply for a small business loan when your business financials are in better shape. That will enhance your chances of approval as well as assist your business to get more good comparative rates. However, we know it isn’t always that straightforward.
Keep in mind that fast funding is expensive cash. It is best if you invest in the process to improve your chances of finding an inexpensive option.
Check your small business qualifications
It is crucial to understand what your business may qualify for before getting too deep in the research for the process of applying for a business loan.
We believe that you do not want to waste a lot of time researching and applying for a loan you would never be approved for. Business loans can be time-consuming and very extensive though it all depends on what you are looking for. At a preliminary level, think about:
Your annual revenue
What was your business yearly revenue last year? Remember that lenders will only offer you a percentage of that. Be sure you take the capacity you can repay.
Time in business
Lending business loans to start-ups is very risky. The truth is that there is not much reassurance your business will repay the debt in a span of one or two years. For that reason, you will have more options if your company has at least three years in business.
Before you apply for a business loan, prepare your personal credit history. Request and review your credit report from every primary credit reporting agency and fix any errors if there is none.
Check on your credit score as well. A credit score of about 680 is good as it will significantly improve your business chances of being approved for a business loan.
Shop your small business loans options
Shop, if you really want to boost your chances of getting approved. That way, you will walk away with a better deal for your small business. Apply with different good lenders, approach the process of shopping wisely, and ensure that you are working with trustworthy and reliable lenders.
Once you apply, wait for the offers, and then you convert the offers to APR. Doing this will allow you to at least compare all the offers side by side and assist you in identifying the ones that are perfect for your small business.
Where should you apply for this business loan? Well, years back, business loans were only offered by banks. However, banks mostly work with qualified and successful owners making it difficult for a small business to qualify.
Fortunately, today, there are more financing options for small business entrepreneurs. They include:
- SBA loans
- Equipment financing
- Invoice financing
- Business lines of credit
- Short-term loans
- Medium-term loans
Plan a presentation, make an appointment
After knowing which business option is perfect for your small business and the business financing company you would love to work with, then make an appointment.
First, plan a presentation and make it compelling to make your financial institution to give your business loan application a second look. Put all your professional package together and any financial statements, graphs, charts, and spreadsheets necessary. Simply put, ensure that you put together an exclusive summary and above all, be organized, succinct, and concise.
When applying for a business loan, you might need to compile the following:
- Time in business
- Business plan
- Outstanding AR
- Industry type
- Use of business loan
To confirm your self-reported details you will provide when applying for the business loan, lenders may also ask for some documents. They may include a valid identity card, balance sheet, average bank balance, bank statements, personal and business tax returns, profit and loss statement, average bank balance, business debt schedule, cash flow forecast, and business and personal credit score.