Businesses usually need to spend and spend in order to generate continuous and positive cash flow for the business. This would mean expenses that would be used for marketing campaigns, building expenses, stock orders, employee salaries and benefits, and a lot more, would be needed by business owners in order to keep the businesses afloat. And whether they like it or not, even if their cash flow is plenty, they may need to apply for a small business loan in order to gain extra funds.
And while it may sound easy, applying for a small business loan is easier said than done, but still easier compared to full business loans that take a really long time to apply for. If you are a business owner and need to apply for a small business loan, then here are some tips to keep in mind when you’re starting to process your small business loan application.
1. Building your personal credit score
Let’s face it, when opening a business and getting loans, the first credit scores they would have to take a look at are your personal ones. When you get past that initial hurdle, then you can focus on building your business credit score.
2. Building your business credit score
Building your business (and personal) credit score may and can take time, but credit scores tell financial institutions of your ability to repay personal debts, and business debts. These financial institutions will want to see how you and your business manage debts in order for them to actually consider approving your small business loan application.
Remember that you’ll probably be needing a really good credit score in order to be approved for a traditional small business loan, though other private financial institutions may be a bit more lenient when it comes to your credit scores.
3. Know your lender’s minimum qualifications
Research is key. You will most probably need to fit into the minimum criteria of the financial institution you’re looking to apply for a small business loan. Be sure to also check out reviews from other borrowers as some lenders may be lenient when it comes to a business lacking in an area but actually overperforms in another area.
4. Be sure to have your financial documents at the ready
While under preparing kills any chance of getting your application approved, overpreparing can help improve your chances of having your loan application accepted. Remember to keep in mind the wide range of legal paperwork that you might need when applying for a small business loan, like your personal and business income tax returns to your articles of incorporation, have everything ready.
5. Make sure you have a solid business plan
Financial institutions will always want to know how you want to use the money and will want to see that you will have a strong ability to pay for the loan by checking out your business plan and how you expect to earn income from it.
6. Provide Collateral
In order to qualify for a small business loan, an applicant may be required to provide for a collateral to back the loan. While this is true of traditional small loans, other financial institutions may only need a personal guarantee, make sure that you know what they would ask of you.
7. Compare small business loans
Before applying for a small business loan, make sure that you compare them all with each other in order to determine what loan plan works best for you in order to lessen the chances of being disapproved. And keep in mind that too many loan applications are frowned upon.
8. Aim for emotional components
Businesses can tend to forget that when applying for a business loan, those who are approving it are humans too. Be sure that you have complete enthusiasm and faith in your business plan and make the lender be drawn in and become a believer in your business plan as well.