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Getting a small business loan can be a difficult task for an entrepreneur but it is possible. Every business owner wants to have enough money and resources to transform their business into successful income-generating opportunity. This might not be easy for many and most of the time a small business loan comes to the rescue. However, getting approved for a loan is not an easy task and this is where many are left stranded.
Knowing how to go about applying for a start-up business loan is important in ensuring that your loan gets approved. Here are some tips on how.
1. Start the application process early
A loan application will not be approved the same day you walk into the bank and fill out an application. Don’t wait for last minute rush when you need the money to visit the bank. The application can take weeks to months, it’s therefore advisable to start early.
2. Get your financial statements ready
Financial statements and account records normally undergo a review before any approval is made on submitted loan applications. Gather all the necessary documents such as balance sheets, the income and loss statements, and cash flow statements and ensure that they are up to date to make the process easier and increase your chances of getting approved. The records have to be correct, complete, up to date and thorough with no errors that might raise questions.
3. Make a plan on how to use the money
Be clear to the lender on how you intend to use the money in your business. The lender will want to know more about your plans for the money. Don’t just give them a general response, but convince them that it will be a good choice to approve your request. Some of the smartest ways to use a loan might be for business expansion, capital investments or administrative purchases.
4. Maintain good credit
While keeping track of your records and documents, ensure that you pay your bills on time, avoid foreclosures or charge-offs to get a good credit history. Always apply for one loan at a time, selecting the one that you have higher chances of getting approval first so that the credit report won’t impact negatively on you due to previous loans.
5. Know the various types of loans available
It is important that you know which type of loan will work best for you. Don’t apply for a loan with requirements that you cannot meet, such as a Small Business Administration loan when you need a line of credit which will slow down the process. Sometimes, you can even end up not being approved after having done all the hard work.
It is not true that it is hard to get a small business lending approved. It might take longer, but depending on the program that you are applying for, it can be easy and fast. The requirements and document for a line of credit or merchant cash advance are less strict as compared to those of an SBA loan which has higher standards and takes longer to complete.
Take the above tips into account to increase your chances of securing a loan.