Are you thinking about getting a small business loan to grow your company, but you’re not sure how to go about it or what your options are? Small business owners seek loans for a variety of reasons, but the most common reason is to expand their operations and increase their profits. This could involve, for instance, making investments in the acquisition of inventory, equipment, or real estate.
Even though a small business loan can be a great way to help your company grow faster, many business owners aren’t sure where to start or how to get one. While there are unquestionably a lot of choices to choose from, not all of them need to be thoroughly examined. If you need some help getting started, here are five things you can do to speed up the application process, make it more likely that you will be approved, and ultimately set up your business to be successful.
Try to think like a bank or other lending institution when applying for a small business loan. Your level of preparation can make all the difference when they weigh the risk of lending to you. On a loan application for a small business, there is no room for improvisation, so you need to do your homework first.
Find out why you want to borrow money and what you need. Make a financial plan with a detailed estimate of how much money you’ll need. Prepare a budget with careful planning that includes cash flow records, profit and loss statements, and financial forecasts that are supported by evidence. Put together any additional supporting documents you might need to include with your business plan. Documents such as your official business plan, bank statements, and personal identification cards are all examples of this.
2. Research There are a lot of different kinds of small business loans, so you’ll have to do some research to figure out which one is best for you.
The loans can be very different from one another depending on what you need the money for and how quickly you need it. Learn about the fundamentals and primary distinctions that exist among the fundamental types of small business loans: working capital, long-term versus short-term financing, and loans backed by the government.
3. Take into account the likelihood of approval There are a number of factors that determine whether or not you are eligible for a small business loan.
To process your application, most lenders will need to check your credit score. Because the very act of a potential lender looking over your credit history can have an effect on your credit score, it’s best to plan carefully when applying for loans. However, there are also lenders that don’t do a hard credit check but instead look at other qualifying factors like annual income. If you know how you’ll be evaluated and prepare accordingly, you can greatly increase your chances of getting approved and avoid wasting time applying for loans you won’t likely qualify for.
4. Documentation preparation and review Your small business loan application is only as good as the supporting documentation.
Even if you have an excellent business plan and impeccable credit, submitting your application with insufficient or missing documentation can result in rejection. Before submitting your application, make sure to check any of your older or out-of-date documentation.
Some of the documents you might be required to submit are listed below:
Personal and business financial statements, credit reports, and tax returns are all part of a business plan, as are business forecasts and state registrations and licenses. Legal documents include articles of incorporation, commercial leases, franchise agreements, and other similar documents.