Easy Steps to Obtaining a Small Business Loan
Like any type of business, your small business will most likely require a certain amount of capital from time to time to cover various expenses – many of which can pop up at the last minute.
And if money is a little short, your only recourse is to get some help with a small business loan.
While you can always head to your local bank to apply for the loan you need, you’ve got to make sure you’ve got all your ducks in a row – and that includes making sure your credit is stellar, you have plenty of collateral, and your business has been in operation for a long time.
Don’t have all these requirements? No problem. These days, more and more alternative lenders are popping up all over the place with the sole intention of making small business loans much more easily obtainable for the average small business owner.
Step 1 – Have a Solid Business Plan in Place
Regardless of whether you need money to start a new business, or are looking to expand, having a strong business plan in place is important to getting approved for a loan.
Your business plan will tell the lender who you are, what your business is about, and what your goals are. A solid business plan will show the lender that you have a great chance to succeed in your business endeavors, which will make the lender feel more confident in loaning you the money.
Step 2 – Decide How Your Loan Will Be Used
The reason why you need a loan should be clearly communicated with your lender. For instance, is it for building inventory stocks? Buying equipment? Expanding your business? The reason for your loan will have a huge effect on the type of loan you need and what you can qualify for.
This will help the lender determine whether the money they provide will ultimately help your business get access to the necessary revenue to pay back the loan on time and in full.
Step 3 – Determine How Much Money You Need
After you’ve identified what you need the money for, your next step is to decide how much money you need to cover these expenses. Come up with a budget for the costs associated with the expenses you need to pay for. This budget will help determine the size of your loan, and why you require that specific amount. The loan amount will also be used by the lender to calculate your debt-service coverage ratio, which is what lenders use to make sure you have enough capital on hand to comfortably make regular loan payments.
Step 4 – Keep Tabs on Your Credit Score
Your credit score will have a big impact on whether or not a lender decides that you’re eligible for a loan. While many loan options are geared specifically for those with good credit – usually over 650 – there are still plenty of options available if your credit falls below this number.
In any case, it’s always in your best interests to do everything you can to boost your credit score. This will not only increase the chances of you getting approved for a loan, it will also allow you to pay lower interest rates.
Be sure to get a copy of your credit report so you can go through it to identify if there are any errors on it that are negatively affecting your credit score. If so, you can fight these errors to get them off your record, and therefore improve your overall score.
Step 5 – Check Out All the Loan Options Out There
At this point, you’re ready to scope out all the loan options available. While your first instinct might be to visit your bank, the truth is that traditional banks have denied around 80% of small business loans since the recession hit in 2008 – so don’t hesitate to look into your options in the online lending realm.
Alternative Loan Options
Rather than spend days filling out complicated and lengthy application forms at the bank only to find out you’ve been denied a small business loan, you can make things a lot easier for yourself by exploring alternative loan options, such as:
- Business lines of credit
- Equipment financing
- Invoice financing
- Unsecured short term loans
With these types of loans, the application process is all done online at the lender’s website. All you need to do is provide pieces of information such as your name, your business industry, the loan amount you require, what you need the money for, how long you’ve been in business, and your credit score. The application process itself can be done in a few minutes.
Once you’ve submitted this information, it’ll take the online lender as little as 48 hours to approve your loan application. After that, you can expect the money to be funded into your account not long after for you — to be used however you see fit.
When it comes time to tap into capital to cover expenses, it can be stressful to find out how difficult it is to get approved for a loan, and how long it takes for the process to be completed.
Luckily, there are plenty of other options available for small businesses who need a more lax approval process to get the fast cash they need. At Credibly, we understand these challenges, and as such, we help small businesses just like yours find the right funding solution for you to give you the fast cash you need.
To find out more about what options are out there, visit Credibly.com today!