Getting a small business loan can be a daunting task. While preparation is key, it’s important to be thorough and realistic in your approach. Here are 5 things you need to do in order to successfully get a small business loan.
- Check Your Credit
For small businesses, banks and lenders will check your personal credit as well as the credit of your business. You personal credit reports can be obtained, for free, with each of the credit reporting bureaus; however, your business’ credit report is available for purchase with either of the reporting agencies (Experian, Equifax or Dun & Bradstreet) or through particular financial websites and services.
- Determine if You Qualify
You you don’t have business credit and your personal credit scores are low, actively working towards establishing credit and improving your scores will help you tremendously in qualifying for a small business loan. Other things to consider include: how long have you been in business, can you repay the loan, do you have collateral, what is your total amount of monthly expenses and does your business generate enough income?
- Decide What Type of Loan You Need
Lenders are going to ask why you need a small business loan and you should be able to tell them. If you’re looking to start a business, most lenders require some form of cash flow to support funding. If you need financing for every day expenses, a business line of credit may better suit your needs and if you’re looking to grow your business, a federal small business loan (SBA) would be best for you.
- Compare Financing Options
There are 3 main sources for small business loans: online lenders, banks and micro-lenders. Online lenders generally do not require collateral and are good if you need funding fast. Banks and credit unions, transitional lenders, look for your business to established for a least two years and may require you to put up collateral to secure funding. If you have the documents, revenue and time to wait, this is the financing option for you. Micro-lenders work best for people and businesses with either bad credit or no credit who are unable to get approved for a traditional loan.
- Gather Your Documents and Plan
It helps to be prepared. All lenders are going to require the following:
personal and business tax returns,
personal and business banks statements,
business financial statements,
business legal documents (articles of incorporation, franchise agreement, etc), and
After gathering all of your documents and reviewing them, determine which kind of financing you need and are have the highest likelihood of getting approved, it’s time to strategically explore your options. Look at 2-3 similar small business loan options and apply only to the ones you qualify for and can afford to repay. A good small business loan for you will have a low, or the lowest APR (annual percentage rate) while also have manageable repayment terms.
Contact Triport today to learn more about our small business loan solutions.