How to Get Approved for a Small Business Loan
Updated: Nov 7, 2020
Before applying for a business loan, start by narrowing down how you’ll use the proceeds. Will you use for working capital, hiring more employees, purchasing equipment, or expanding into a new location? Having a solid business plan that includes how you’ll use the funds will help you find the lender who can provide the best financing options.
Build your credit score Most lenders will consider credit when evaluating potential borrowers. Strong applicants typically have fairly high personal and business credit scores, which demonstrates their ability to pay back the loan amount. With higher credit scores, you’ll also have access to more funding options with lower rates and longer terms. Your credit report will usually be pulled from one or more of the three major credit bureaus: Equifax, Experian, and TransUnion. You can find your information there as well as through your credit card issuer.
Get to know lender qualifications and requirements Once you have a few loan options in mind, you can start looking for a lender. Each will have different requirements and eligibility factors to demonstrate that you and your business are financially healthy.
Some lenders may require more information than others, depending on the type of loan they’re offering. For example, banks who partner with the SBA will present you with additional eligibility questions from the government agency since they guarantee the SBA loans.
Making sure you meet lenders’ minimum qualifications will save the effort it takes to progress through an application only to be met with a “no” later down the line.
Choose a product that works for you There’s a wide variety of lending options out there. Some are limited to specific purposes and terms, while others are more flexible when it comes to the life of the loan and the ways they can be applied to business operations. From SBA loans to invoice factoring to merchant cash advances. With a clear picture of your intended use of proceeds and eligibility, you can select the best fit for your small business. Then, look into the lenders who offer your preferred business financing and use metrics like APR to weigh your options so you can make the most informed choice.
Gather necessary documents Lenders typically require a variety of financial documents before providing business financing. Some of the most commonly collected paperwork includes personal and business tax returns, personal financial statements, and income statements, among others. Having recent documentation will help you move through your application quickly. #businessloans #commercialrealestateloans #sbaloans