Obtaining a small business loan can be difficult to say the least, but it doesn’t have to be a nightmare. If you are able to go into the application process prepared, then this will help you to obtain all of the money you need to take your business to that next level. If you follow the below guide, then you will soon find that it is easier than ever for you to get approved as soon as possible as well.
Keep your Documents in Order
Transparency is a must. The application process will be completely and utterly seamless if you take your time organising your financial, accounting and tax records. If you want to really get a good experience, then it may be worth trying to hire an accountant at this stage as well. A lot of small business owners try and save money by self-financing or even handling their own bookkeeping. This often leads to owners ignoring their books whenever they get too busy but if you hire a good accountant then they will be able to help you go over your books without being distracted and they can also give you some support when it comes to making tough decisions as well.
Maintain a Good Level of Credit
You have to make sure that you pay your bills on time and that you also meet some of the credit criteria that is present. Try and avoid late payments, foreclosures and even charge-offs. Of course, it’s also vital that you avoid bankruptcy as well. Of course, this also means that you should apply for a single loan at a time. If you apply for too many loans at a time, then this can impact your credit rating, and this is the last thing that you need.
When you choose to submit a full loan application, this will put a “hard pull” on your credit report. This action alone can shave a few points off your credit score. As a one-off this is not a huge deal at all, in fact, it shouldn’t really affect you when you are making the decision to apply for credit. That being said, if you apply for lots of different lines of credit at the same time then this will almost certainly work against you. If you are struggling with the idea of a loan then check out this guide: Fundbox presenting: Best Small Business Loan Alternative.
Know what Loan you Need
Understanding the type of loan that is going to work best for you really is so important. Applying for a small business loan when in reality, the only thing that you need is a line of credit is not a good idea, in fact, you may even find that it slows down the process and ends up in denial. Some of the biggest myths regarding small business loans and lending include the fact that it is difficult to get approved, that loans are expensive or even that it takes too long to take one out.
The truth, at the end of the day, is that your loan depends on what you are applying for and who you are applying with. If you are trying to take out an SBA loan, then you may end up waiting between 30 and 90 days to get it complete. Your loan provider will also ask for way more documentation when compared. If you apply for a line of credit or even a merchant cash advance, then the requirements and even the documentation will be far less stringent.
Demonstrate the Fact that you Have Enough Cash Flow
If you are a business already, then your bank will want to know that you have enough cash flow and they will also want to see that you can make all of your monthly payments. They will do this by looking at your previous tax records and the debts that you have. If you are purchasing a business or even starting one from scratch then there is no reason why you shouldn’t be able to show your detailed financial projections or even a plan that demonstrates that you will be able to make all of the required payments.
Every Bank is Different
There are pros and even cons with every lending institution that you go through. Bigger banks are often far more preoccupied with their big clients, and to them, larger loans ultimately mean bigger profits. They might be willing to finance your business but you might be able to get more attention or even more favourable terms if you are willing to shop around. Bigger banks also have more stringent requirements because their primary goal is not to fund small businesses, it’s to fund bigger ones. If you want to help yourself then you ideally need to meet with a bank who can talk with you about your business and what you want to achieve. You also need to make sure that they can provide you with flexible payment rates as well.
Read Reviews
Another thing that you can do is try and read up on some reviews that other customers have left. When you do this, you will soon find that you can view the pros and cons of going with that company. You can also find out if customers have had problems with that company and if they are trying to warn you of anything. If you are not entirely sure if a company is right for you or not then this is a fantastic way for you to find out if they are going to be a good option and if they have any other features that you need to be aware of.
If you are not sure, then it is always a good idea for you to chat with the loan company’s advisory team. When you do, they can then work with you to make sure that you are completely understanding of the terms that you have been offered while also helping you to know if a small business loan is really the right solution for your funding.
