Some businesses can continue to exist without an extra line of credit or a small business loan at some point. In case you’ve never secured a loan before, don’t forget that the first loan is normally the toughest to acquire. Lenders choose to lend cash to borrowers who have borrowed at least once and have paid back at least one loan on time.
Traditional lenders aren’t venture capitalists who provide high-risk loans. They opt to lend to low-profit, low-risk ventures as compared to high-risk businesses with no business record in any respect. Traditional lenders cite risk factors and increasing charges of servicing small accounts as the primary reasons for minimizing their exposure to small businesses.
Here are 10 of the best ways to improve your possibilities of getting a small business loan:
- Find A Bank Or Lender
Banks tend to make loans to businesses. That is a number one reason they stay in business. To increase your probabilities of success, find a bank that has done business with companies like yours. Look for the traditional lenders active in small business financing. Some banks are lending money without the government help and at the same time some banks take part in government programs.
- Understand The Loan Terminology
Understanding what you are looking for and the types of funding provided by banks can’t hurt.
- Get Organized
A small business owner must be prepared in a lender’s office. You need to show your lender that a loan is a low-risk proposition, so you need a completed loan application in hand, copies of cash flow and financial projections masking at least three years plus a cover letter — the executive summary.
- Know Your Credit Score
This is one of the first things a lender seems at when reviewing a loan request, so it’s essential to know your credit score. FICO scores range from 300 to 850. It is difficult for a business with a score of less than 600 to get business credit from a lender.
- Expect The Difficult Questions
Keep in mind preparing for a job interview? The interviewer then never asked something you feared. Alternatively, they requested something you had not prepared for in any way. Expect the truly unique questions to create the satisfactory impression. A confident and carefully prepared borrower is four times much more likely to have a loan approved than a borrower who does not understand the solution.
- Look Professional
This might seem like an easy thing; however some business owners purpose being their own boss means dressing as they wish. That is fine for young high-tech executives who move around in flip-flops and ragged jeans. It’s no longer so pleasant for a startup meeting with a lender. Plan an image of a business owner who is sober, honest and professional, one who has the ability to pay off the loan.
- Speak The Truth
Avoid unconfirmed statements. Any business lender can easily check the statistics in your application. In case you can’t support your statements, don’t make them. Be able to support your statements, consisting of every single number in your projections.
- Have All Your Documentation Prepared
Be sure all of your documents are clear, legible and prearranged. Type all your small business loan documents as the handwritten documents look unprofessional. Don’t neglect to include a cover letter. Your lender cannot make any lending decision until he see that all your financial documentation is complete.
- Be Confident
Your attitude and confidence can improve your odds of getting a small business loan. Prove that you can make a success out of the cash that you lend. Consider the positive results of the bank application, and inform them as well.
- Keep Looking Until You Get The One
If one lender turns you down, keep looking for funding until you get one. You can also ask for a referral from a successful business owner in your community; bankers, like everyone else, network drastically and are much more likely to trust referrals from appropriate clients. Find an associate, acquaintance or friend in good standing with the bank.