There is a lot of information out there about applying for a small business loan. In this post, we will review the steps that you should take to apply for a small business loan. You should be able to get approved for a loan that fits your business needs after you complete the following steps.
Before you apply, you need to know why you are pursuing a small business loan. Some reasons include, planning to expand, paying off debts, or simply needing additional cash flow. Knowing how you plan to use a loan can help you determine how much you will need which is helpful for the lender.
Also, ask yourself if you’re ready to take on a business loan. A loan provides your business large amounts of cash, but it is also debt until you pay it back. You have the best chance of landing a loan when your business is performing strongly. If you have significant business credit card debt or other outstanding balances, you should consider waiting until you have repaid your debt and then apply.
The last question you should ask yourself is if you have considered all financing options. Make sure to do your research and compare other offers before you apply. It takes time but at the end it is worth it. For example, if you have long-term goals, a short-term loan will not be the best option.
Lastly, it is important that you make sure your industry will qualify for the loan. Certain lenders have placed restrictions on certain industries so do your research, so you don’t run into any problems.
You should have a business plan that defines how you will utilize a loan. You should provide information such as your profits from the year before, monthly sales amount, and more.
Every lender’s requirement will differ, and you may have to submit documents such as:
Next, gather your business licenses, permits, and certifications. Anything that proves your ownership should be included, such as:
Some of the required financial statements include balance sheets, bank statements, profit and loss statements, tax returns and more.
You should check your personal and business credit score through at least one credit union. Because your credit can affect the terms and conditions surrounding your final loan offer, it’s important to be aware of these numbers prior to applying.
If your business credit score is under 600, it might affect your chances of qualifying for certain types of loan programs.
If your business owns or rents any property you should include the following information:
On your application, be honest about your past businesses and debts. Any information that is false will result in your application will likely be rejected. In addition, it might be worthwhile for you to have a colleague or business partner review the application to ensure that you don’t miss anything.
Some online lenders can inform you if you qualify for a term loan within 24 hours but others may take up to several weeks to analyze your application.
You may need to provide more documentation along the way, so make sure to get back to the lender quickly if they follow up. Ultimately, the waiting period depends on your chosen lending institution and application strength.
It is important as a business owner that you make responsible financial decisions. When applying for a business loan, be sure to follow the steps in this post. If you do, you will be more likely to qualify for a loan.