Small businesses need working capital to grow their business and cater to the growing demands of consumers. Eligibility requirements vary among loan options, but many agencies cater to new entrepreneurs and those with poor credit.
Before you apply for a loan, you need to gather all of the appropriate documentation and ensure you meet the basic qualifications of approval. There are a number of easy tactics to help boost your credibility in the eyes of lenders.
How To Get Approved for a Small Business Loan
There are a variety of steps to take to ensure your application is approved quickly and easily. Here are the primary things to take into account.
1. Your Credit Score
Depending on the loan option, a good credit score, often 650 or higher, will be necessary in approving the loan. If you have yet to build credit or struggle with poor credit, there are still financing options available to you. However, the higher the credit score, the more likely you are to be approved quickly and easily.
For those with poor credit, focus on bolstering your business plan as much as possible, as well as providing evidence of strong business finances, as this will help compensate for lacking credit.
2. Your Stage of Business
One of your primary considerations should be the stage of business you are currently in. There are fewer loan options available to new businesses and first-time entrepreneurs than there are for established small businesses. For new businesses, venture capital investors, crowdfunding, and government-backed loans are the most accessible forms of funding.
Established businesses have more options available to them, and provided you are in good financial standing, you can likely qualify for a low-interest commercial bank loan and unsecured credit line.
3. Your Business Plan
Prior to applying for a loan, it’s important to fine-tune your business plan and be prepared to present it to lenders. Lenders want to see a meticulously thought out business proposal that details the exact plan for implementation, accurate projected returns, and an action plan for creating those returns in an allotted timeline.
The more compelling your business plan is, the more likely you are to be approved by lenders.
4. Your Business Finances or Personal Finances
For established businesses, providing evidence of your monthly finances will be essential. This includes submitting all tax documents for the last two years and providing proof of your monthly earnings. While business finances won’t solely determine your eligibility for a loan, they will help to determine the quantity of the loan, as most lending agencies provide loans in conjunction with a business’s average profit margin.
For brand new entrepreneurs who lack business finances, providing evidence of your personal finances can help facilitate the approval process. Showing that you are hardworking, in good financial standing, have no outstanding debts, and have a proven track record of fiscal responsibility will significantly enhance your potential of qualifying for a loan.
5. Your Ability to Provide Collateral
Especially for new businesses or those with poor credit, providing some form of collateral is essential to secure the loan. Collateral varies among agencies, but many require you to secure the entirety of the loan, which can be challenging when applying for startup funds. Offering your car, house, or business as collateral for the loan will enable you to get approved much more easily.
Applying for a loan can seem intimidating at first. With all of the requirements that go into securing the loan, many worry their applications will be rejected. To make the process easier, ensure you have everything planned out prior to applying, and carefully review the application requirements of the agency in advance.
You will likely be asked to provide your credit score, business and personal finances, tax documents, and collateral in order to be eligible for a loan. Access the capital you need to thrive in the marketplace. To learn more about how to get approved for a small business loan and other modern business funding solutions, contact Credibly.