When it comes to getting a small business loan, you need to put yourself in your lender and bank shoes that you’re networking with. If you were in their role, would you feel confident offering cash based on the set of circumstances and factors an applicant provided, and the interview process? When you turn the script and look at the matters from their point of view, you should be able to see your situation in a less biased light.
Here are some tips to improve your odds for getting approved for small business loans.
- Start the Process Immediately
You are not going to walk into your local bank, fill out an application, and get approved for a loan immediately. The approval process can take weeks or even months to unfold. That is why it is good for you to start the process as soon as possible. Don’t wait to apply for funding until you need the cash or you may end up with bad or high-pressure situation.
- Manage Your Credit History
While you may want to split your personal and business finances, small business lenders will factor in your personal credit records while figuring out the risk level you have as a borrower. In case you are anxious about this a phase of the process, you need to focus on some methods to improve your credit score. Your credit score is made of the five factors, which include the payment history, credit utilization, credit age, account mix as well as credit inquiries.
Your payment history and credit utilization composes the bulk of your score. However, you can improve your credit score up a few points within a couple of months by paying your bills in a timely manner and using less of your approved credit line. If you have a credit score of 660 or less, you will definitely experiencing trouble in getting a small business loan from a traditional source such as bank. On the other hand, if you have a credit score of 720 or above, you are considered as an ideal candidate for small business loan.
- Have a Plan for Where You Want To Invest the Money
While speaking with your lender, you need to be clear about how you are going to use the borrowed amount. Giving some unclear plan or some general statistics about your business growth is not going to work. The lender will need to know about how the funds will be used so that they can determine the feasibility of your funding request.
As everyone knows that every business is unique and different, however some of the best ways to use the small business loan are expansion, inventory purchase, capital investment and administrative expenses. You can also choose to refinance and pay down your debts, but these are not highly regarded ways to use the funds.
- Be Organized
Getting organized and prepared in advance plays an important role in whether or not you’ll be approved for a small business loan. If your small business lender will ask you to provide some specific financial document, and you have organized them before visiting the lender will help the lending process as well as saves you time.
The best thing for you is to over-prepare before visiting the lender for funding. By getting ready every possible piece of document that your lender could ask for, you can amuse him with your dexterity, and take control of the lending process.
- Get Expert Advice
Requesting your lender a specific amount is one thing; but setting up a meeting and explaining them that you have met with your finance expert and accountants, who have determined that you actually need more than that amount in order to expand your small business’ productivity. As said previously, every lender wants to see a comprehensive business plan. They also want to see that you have communicated with your experts and understand the situation.
Getting a small business loan is not a one step process. You need to convince your lender first that you are worth the risk connected with lending money. Make sure that you speak all your limitations and highlight all the optimistic things to improve your chances of being approved for a small business loan.