Applying for a small business loan may be essential to secure the funding for your small company. However, applying for loans can be a challenge for small businesses. You may not have the long years in business or the assets of larger corporations.
Nevertheless, you can still win over lenders and increase your chances of securing a loan. Here’s how:
1) Understand What Lenders Want
When lenders offer a small business loan, they want to see that loan repaid with interest. Their primary concern is whether you will repay what you owe. To determine this, they will look at your credit history, your business plan and how likely your business is to weather the challenges of a small company.
Once you put yourself in your lender’s shoes, you can see the application process is not personal. You don’t need to impress anyone, but you do need to impress upon them that your small business is a good risk and investment. To do this, you need to show how your business will succeed where other companies have closed.
2) Build Your Credit
Before you even speak to a lender, build your business assets and your business credit. This is one of the first things a lender will look for, but if your company doesn’t have adequate assets and strong credit, it will be extremely challenging to get a small business loan.
To build your credit, you may want to secure credit from suppliers, who are often willing to extend lines of credit or other forms of credit to new and small businesses. Work on paying your suppliers and vendors on time, whether you use credit or not, and this will help to strengthen your credit rating. You can also use bootstrapping or investors to raise funds for your business and use some of this to buy assets for your company.
3) Do Your Homework
Before you apply for a small business loan, research the lender. What kinds of loans have they offered? Do they work in your industry? Of those companies successful in obtaining loans, what were the common denominators?
Once you understand the lender, compile any possible documentation to prove your creditworthiness. This may include business tax returns, annual reports, your business plan, proof of sales or revenues and more. Even proof you have successfully managed or owned a profitable business in the past can help. Organize all your paperwork so you can easily retrieve it and bring it all in with you when you meet the lender.
4) Work With a Small Business Loan Consultant
A small business consultant such as SLC Bookkeeping can help prepare you for meeting lenders. SLC Bookkeeping can demystify the lending process and can help you explore your lending options Contact us today to get support in putting together a strong loan application.