Applying for a Small Business Loan. Making it Easier
Business owners use small business loans to open and expand their businesses, as well as to cover the costs of necessities that keep the establishment up-and-running. Business owners with previous experience with business loans understand clearly that the process of obtaining a loan is sometimes difficult, although newcomers may not be so keen on the headaches the process brings.
If you need the capital offered from a small business loan, learn a few tricks of the application process before applying for cash. The tips below eliminate the need for ibuprofen and provide you a smooth, pain-free loan application process. What more could you ask for when applying for a small business loan?
Maintain Good Credit
Credit oftentimes stands in the way of getting a loan. Avoid such an issue by maintaining good credit. The better your credit, the better your odds of a loan approval. Plus, interest rates are considerably less for business owners with good credit.
While some people think that maintaining good credit is a difficult task, it is as simple as paying your debts on time, opening small lines-of-credit with trusted vendors, and maintaining an accurate, up-to-date business accounting service. Although loan lenders understand that new businesses many yet to establish credit, those who are established always expected to have a good credit history and credit score backing their name. Avoid the headaches and woes of back credit and take every step possible to maintain your good credit.
Understand Loan Types
It is much easier to qualify for a loan if you apply for the right type of loan! But, do more than learn the name. Research each loan type in-depth, evaluating the pros and the cons against your financial needs before choosing the best for your needs. Among the small business loans that could serve your needs:
Secured Loans: A secured loan is one in which a lender approves the loan, but requires collateral to grant the approval. Collateral can usually consist of any item of value, whether it is electronics, jewelry, real estate, or even vehicles.
Unsecured Loans: If you have better than average credit or have a well-established relationship with your bank, lenders may offer unsecured loans that require no collateral.
Line-of-Credit: A line-of-credit is one of the easier types of loan for a business to obtain. It is useful that every business establishes lines-of-credit with their vendors so monies aren't needed at the time of services rendered.
Installment Loans: An installment loan is given to a business to cover most any need they have. The loan requires no collateral and is repaid in monthly installments until the total, plus interest is repaid.
Understand Your Needs
We’ve discussed the importance of familiarizing yourself with the various types of loans. Now, it is time to familiarize yourself with your loan needs. With a clear understanding of the types of loans, it is much easier to determine how much you can afford to repay, if the loan is really necessary, etc.
Create a list detailing the amount of money that you need, how the cash will be used, how you'll repay the money, etc. It takes very little time to create this list and better understand your financial needs. When you understand your needs, you’ll save time and avoid applying with lenders who aren’t offering the type of program that fits your needs.
Demonstrate Cash Flow
Already established business should prepare to show lenders they earn sufficient cash flow to repay the loan. Tax returns and existing debt are the two factors lenders use to determine if sufficient cash flow is enough to qualify you for a loan. If a lender suspects your ability to repay the loan, don’t expect an approval!
Before applying for a loan, prepare a business plan that illustrates your cash flow and ability to make the monthly loan payments if you’re approved for the loan. Ensure these document, including the business plan, are also readily available to provide to lenders upon request.
Get Approved for a Loan Today
Business loans help your company thrive, although the loan application process is oftentimes tedious and time-consuming. Depending on the type of loan you apply for, it may take up to 90-days to hear a yah or a nay concerning your approval status.
Improve the odds of hearing yes when you apply for your loan by using the tips above before and during the loan application process. It is the small things that matter most when you’re applying for a small business loan. Make sure they count!
