No matter the state of the economy, it can be hard to get a small business loan approved. The loan may be necessary to launch your startup or to expand a growing enterprise. In any case, lenders are afraid of the risk a small business loan poses, which increases the odds you’re wrongly rejected. Here are a few tips on how to increase your chances of getting a business loan approved.
Have a Strong Business Plan
Your business plan is one of the key factors in getting approved. It is more than a justification for why you need the money. It shows lenders that you have a clear, reasonable vision for your business.
They know how you’ll use the money and use it to generate a profit that will, in turn, be used to pay the payments. Furthermore, you need to focus as much on the executive summary as the full-length business plan. If they aren’t persuaded by the executive summary, they probably won’t read the rest.
Provide Detailed Financial Information
No one wants to loan money to someone who can’t verify their income or lies about their financial situation. The same is true of small businesses applying for credit. This is why you must provide detailed financial information to prove that you’re a good lending risk. This list includes but is not limited to tax returns, bank statements, accounts, balance sheets, and cash flow information. Prove to them that you’re financially stable and fiscally responsible.
Know that you may be asked to provide personal financial information, as well. Businesses will consider your business a better risk if your personal credit is excellent. This is necessary if you are going to give a personal guarantee for the business loan. That also makes fixing your personal credit score a good idea before you start applying for business loans.
At a minimum, look into different lenders. Don’t assume you have to use your local bank. Consider alternative lenders as you shop around for a business loan. This increases the odds you’ll find someone who will work with you, regardless of your situation.
A service like AdvancePoint Capital could help you. They offer equipment leasing, invoice factoring, lines of credit and business cash advances in addition to conventional business loans. You can also spread your business around, taking out a new loan with a different institution instead of the one you do most of your banking with.
Understand Your Options
There are many different types of loans available to businesses. You can get a secured loan, whether it is secured by your home, business office or inventory. You can get financing based on unpaid invoices from customers. You could take out an unsecured loan. Consider the types of loans available relative to the assets you have and the amount of money you need.
You could also consider various payment plans. Have a plan for how you’ll make payments based on several loan amounts and loan durations. This shows lenders that you’re a responsible borrower and able to pay off the loan no matter what. That increases your odds of approval.
Invest Your Own Money
Lenders will give you extra consideration if you’re willing to invest your own money. This could take the form of putting part of the money down required to buy an item on credit. Or it may take the form of personal collateral. This tells lenders that you’re serious about the investment and won’t take a wild risk.
Whether you have a brand new or established company, we’ve outlined the five things you need to do to nearly guarantee you’ll be approved for a business loan. Our advice may also lower the interest rate or fees you’re charged on the loan.