Many small businesses would benefit from a quick surge of cash, but getting a small business loan can be confusing for a lot of people. There are so many requirements for different lenders that it can be difficult to keep it all straight, but a little preparation can make all the difference. If you think your business could use a small business loan, here are some ways you can improve your chances of approval.
Do Your Research
Research is likely to be one of the most crucial steps of the entire process. Spending even a few hours looking at your options can save you a lot of time and heartbreak down the road. As you do this research, you’ll discover which loans you’re most likely to qualify for, the benefits of choosing one lender over another, the lists of application requirements, and a time frame for applying, approval, and access to funds. While conducting this initial research, you might also come across uses for a loan that you hadn’t considered before, prompting you to rethink your company’s potential.
Boost Your Credit
If you’re young and new to operating a small business, chances are you won’t have much personal or business credit. If you’re applying for local business loans, there’s a decent chance you’ll need to build up both. A credit history is almost always required, and lenders will want to see that you don’t max out borrowing power regularly. To keep that number heading in an upward direction, come up with a plan to pay on time and keep your spending in check. See if you qualify for business credit cards that offer points or rewards. You should also regularly check your credit reports so you can report any errors as soon as possible. If you don’t, you could be looking at a small mistake that impacts your credit for years.
Create a Business Plan
Your business plan is one of the most important elements of the entire process. The business plan shows you know what you’re doing, where you’re going, and how the money will help you get there. Arriving at a lender’s office with a professional appearance and a professional business plan will send an important message. It will show you take your business seriously, have done your research, and will use funds wisely. Considering how competitive it can be to get certain loans, any advantage you can give yourself will matter. There are many free templates for business plans available online to give you an idea of the format.
Be Realistic About Cash Flow
Inconsistent cash flow is one of the biggest obstacles small business owners deal with. Unfortunately, without it, you’re unlikely to secure a good loan. Lenders will be scared off by inconsistent income, but even if you’re able to get a loan, being unaware of your cash flow could mean you’re unable to make payments later on. This is one of the most important pieces of data you’ll need to compile for your business plan and your application, so it’s a good place to start if you’re feeling disorganized.
Consult an Expert
If you’re unsure about your chances of finding a loan, or you don’t understand part of the process, there’s no harm in consulting an expert for clarity. Consulting the right financial expert can help you narrow down potential lenders, choose a borrowing amount you can afford, and plan a realistic timeline for the application process. There’s certainly no reason to rush, especially when a huge influx of open applications and inquiries can look bad on your credit report. Plus, one bad impression can impact your ability to use lenders for years down the road, so why burn bridges when you don’t have to?
Getting a small business loan is a big step for any company, but the process can be long, tedious, and confusing. With a little prep work and a handful of conversations with the right people, you can boost your chances of getting life-changing funding.