You’ve hit a wall in your business growth. You need more working capital. A small business loan may be the most secure and cost-effective approach to receiving the capital your firm need. The requirements can be stringent and the application process can be extensive.
Here are five strategies for securing a small business loan.
1. Prepare to Explain the Reasons for Your Loan
In order for a lender to approve your loan proposal, they will need to see a convincing reason for the funds. If you are just going to use the money to pay off other debts, lenders will not be impressed. They want to see that you will use this new working capital to grow your business and increase your revenue, making it easier to repay their loan. Get specific in your needs and lay them out clearly for lenders.
2. Prepare to Qualify
When deciding whether to loan you money, a lender will want to know your business credit score, how long you’ve been in business, how much your company brings in annually and how you plan to repay the loan. If your credit score is too low or you have not been in business you may not be able to qualify for certain small business loans and may have to apply for alternative funding.
3. Prepare to Apply for the Right Loan Type
Fortunately, there are plenty of different types of business loans to choose from. With good credit and several years of business history, your options are wide open. SBA loans offer credit interest rates and terms. A business line of credit could also work for short-term needs. Invoice factoring is a good choice if you have lots of purchase orders. For those with less-than-perfect credit or just getting started in business, lending options like crowdfunding, business credit cards, and even personal loans might help your cash flow needs.
Also, you must know how much your monthly loan payments will be based on the loan amount, interest rate, and loan term. This is important because it can help you to understand how much you will need to pay each month and whether or not you can afford the loan. It can also help you to compare different loan offers and choose the one that is best for you. By using a loan payment calculator, you can make more informed decisions about your finances and ensure that you are borrowing responsibly.
4. Prepare to Apply with the Right Lender
Banks and credit unions are among the most traditional lenders, but they also employ the strictest credit standards. Microlenders help those with small companies and small loan needs, and online lenders provide funding to companies in need of cash fast. Research all the choices to know which is the best fit for your company.
5. Prepare the Documents for Small Business Loan
Almost all loan applications will require the same type of documents. These include business and personal tax returns and bank statements as well as financial statements and any documents showing the licensing of your company. Pulling these together beforehand can save you time and headaches.