6 Steps To Get a Business Loan Approved
Are you a business owner preparing to take the next step or just trying to get through a difficult economic era? Or perhaps you’re planning to launch a brand new business? For an entrepreneur, finding a good loan offer makes a huge difference.
The Small Business Administration is a government agency that offers support to small businesses and entrepreneurs. They have set guidelines to help business owners determine if they are qualified for a loan. A new kitchen upgrade, startup costs, and tech devices for business operations can all be covered by a business loan. But before you submit your application, take note of these 6 steps that should help you get your loan approved.
1. Develop a Workable Business Plan
Drafting a solid business plan is necessary whether you go to a traditional bank or an alternative lending option. Lenders want assurance that you know what you’re doing with their money. You should include details on how you plan to allocate the funds and how it can help you increase profit. If you have goals and financial projections, you can also include them. Make sure to exhibit that the business has the sufficient cash flow to carry the burden of loan payment.
The business plan should include:
• Company description, product and services offered, competition, and market share
• A summary of your management team and staff members
• Sales and marketing plan
• Facilities and inventory operation plan
2. Maintain good standing for personal credit
As a business owner, you and your partners should have a strong credit rating to improve your chances of getting a good offer. Show your loan provider that you have a good history of managing debt payments and that you are not at risk of defaulting on the loan. Strong credit history and score show that you are financially responsible. Your credit reports will display your payment history, how much you currently owe, and how long since borrowing started.
3. Identify which assets to use as collateral
Taking out an exceptionally large amount or applying for a loan with poor credit may require you to put up an asset as collateral. You can use real estate, vehicles, or valuable equipment from your business. You can also include shareholders’ equity in this. You do need to get your assets appraised and attach them to your application. It is easier to get a secured loan approved. You can also get better rates and terms if you have an asset to back up your application.
4. How would you invest in your business
Lenders can also require business owners to put their own money and invest in the business. This exhibits confidence in the business plan. No bank will offer 100% of the funds you need. Term loans expect borrowers to have 20% equity invested. You can compare this to a down payment when you get a mortgage for a house. The higher the personal equity invested, the better the chances of getting a good offer.
5. Compile documents and update your information
Show your lender that you have what it takes to run the business. Your education, accomplishments, and work experience should put you in a positive light. The more competent your resume looks, the better your chances. You can also include your personal and business tax returns, mortgage or leases, balance sheets, bank statements, and articles of incorporation in this collection.
6. Prepare your references
You can include personal references as well as business references. Former colleagues and managers, clients, and vendors you’ve maintained a good relationship with can speak for your business.
Lenders We Recommend for a Small Business
Rapid Finance
• Several financing options
• Fast approval
Rapid Finance was established in 2005 and has now offered more than $2 billion worth of funding for businesses. The company was launched as an alternative to traditional lending institutions. Compared to typical banks, they are more flexible and can work with different business sizes from various industries.
OnDeck
• Great customer service
• Approved in 24 hours
OnDeck provides lines of credit and typical business loans but with more flexibility. You can also get your application approved in 24 hours and receive the funding that you need.
Conclusion
The United States has millions of small businesses. Entrepreneurs should be prepared and committed (and maybe have a bit of luck) if they want a business to succeed. Both traditional and alternative lenders can help you with the funding you need. With these key steps in mind, you can increase your odds of receiving a favorable loan offer. Make sure that you meet your lender’s requirements and show them the strength of your personal and business credit history.
