You have the drive, the skills and a great business plan. But you lack funds, so you need a good business loan. The following guide will help increase your chances of getting a small business loan.
Have the following things ready before you go to your lender:
- Try to pay off your debts as best as you can.
- Have your business plan with you.
- Have your financial history ready, which should include balance sheets, account receivables and account payable aging reports.
- Prepare your growth plan.
- Have enough collateral to pay back your loan; this makes you seem like a safe risk.
The aforementioned should make your lender feel confident about your readiness.
Investigate Your Lenders
You have several choices when deciding which lender to choose; for example, commercial banks, community banks and independent lenders.
You should try to apply to only 3 to 4 lenders to ensure you won't seem desperate to lenders. The most important thing you can look for when it comes to lenders is if they are under regulatory restrictions. Regulatory restrictions are imposed on lenders who are having financial troubles. These lenders will have a tougher screening process and may deny you.
All you have to do is type in the name of the bank online, and find out if they have this regulatory restriction imposed on them. This information is open to the public, so you can find out easily.
Prove Your Loan Is Profitable
Your loan is bankable to your lender if you can show a good chance for profit. This is a very important part of the lending process and one that you should pay close attention to. Lenders will not let you borrow money if they think your business idea is too risky.
The following are some things that make the loan you're asking for appear bankable:
- You and other non-relatives should have a good amount of money to invest in your business. This shows that you are confident in your own business and makes the lender pay attention to you, too.
- Similar businesses like yours should have profits. This will help your business seem potentially profitable too.
- Make sure you are willing to personally guarantee your loan. This should make your lender feel more comfortable about lending to you.
- Show experience as a business owner. Lenders want to know that you are educated in your particular industry.
The aforementioned tips should help improve your chances of getting a small business loan. You can also talk to your loan specialist about other options you may have.