There’s no silver bullet for getting a small business loan, but we’ve put together a few tips that can help improve your chances of securing financing. Check out the list below:
1. Know Your Credit
Make sure that you understand your business and personal credit scores and credit status. Look at your credit score and credit report and take care of any issues that might be bringing it down. And, be prepared to explain your credit issues.
2. Create a solid business plan
Take your time when composing your business plan. A strong business plan should demonstrate how your business will achieve its goals over the next three to five years. Make sure to include management team information and experience, your target market and product/service differentiator, competition and economic considerations, capital and equipment needs, and financial projections.
3. Know how much you need and how you will use the money
A prepared business owner knows how much he/she needs and for what. Your loan request should be specific and should track with your business plan. Lenders appreciate attention to detail and preparedness. For example, if you are looking to purchase a new piece of equipment, provide quotes on the exact costs, how much capital you need to facilitate this purchase and specifically how the new equipment will help your business succeed.
4. Provide detailed information
Be prepared to share all of your financial information with your lender including financial projections and your personal financial information. Also, make sure you fully complete your loan application. Leaving information out can lead your lender to question what else you didn’t mention.
5. Do your research on lenders
Your lender doesn’t have to be a bank. There are plenty of local resources out there if you do your homework. You may want to consider non-traditional, non-profit lenders, or Community Development Financial Institutions (CDFIs). Consider talking with local trade associations or your local U.S. Small Business Administration office for information about available loan products and lenders.
Once you find a lender and a loan product that’s right for you, make sure you understand all the terms and fees associated with your loan as well as the annual interest rates.
6. Come prepared
Before you apply for a loan, you need to be prepared. While every lender has specific forms you need to fill out and documents you need to submit, you will likely need to submit much of the same information. Consider gathering these key documents ahead of time which are typical for many small business loan applications.
- Loan application form
- Business plan
- Personal history with resume and accomplishments
- Personal credit report
- One year of bank statements
- Current financial statement of all personal liabilities and assets
- Projection of revenue statement
- Collateral list
- Last three years of business and personal tax returns
- Articles of Incorporation
- Franchise agreements
- Commercial leases
While we can’t guarantee that following these tips will result in a small business loan, they should help you increase your chances. Do you think you’re ready to apply for small business financing? Get started today!