Do you want to expand your small business and live the entrepreneur’s dream? Business expansion takes capital, and that often indicates getting a small business loan. The cash is accessible, however to increase your possibilities for success, you’ll need to consider how to explain that your small business is prosperous.
In the long run, it is all about cash, however in the beginning, it should be about planning. Without appropriate business planning, small businesses frequently get declined for a loan. Here are some steps you can follow to improve your chances of getting a small business loan application approved.
- Don’t Apply Until You’ve Improved Credit Score
Traditional lenders, online lenders and credit unions set their own lending standards for approving a small business loan; however they all are looking one thing, what type of risk or risks they have doing business with you? Additionally they will evaluate both your personal and business credit history. In case you are experiencing low or bad credit, you need to fix and raise it by paying down credit cards and settle any other remaining debt and liens against your business.
- Repair Any Glitches In Your Credit Report
You need to know that the credit bureaus have almost a month to resolve any issue on your credit report, so you need to wait until the credit bureaus fix the problem to apply for a small business loan.
- Apply The Loan Before You Need It
In case you are looking for an SBA guaranteed loan it normally takes two months for the approval. And it may seem unreasonable; however apply for a loan when your small business is flourishing: The depressing reality is that it’s difficult to get business funding when you are having irregular time.
But applying from alternative lenders can provide you funding in just couple of days. Additionally you can get affordable terms and rates on small business loans.
- Calculate How Much You Want To Borrow
The worst move you make is to go to a bank and ask them how much can I borrow? You should have a knowledge and calculation of how much you need and how you will use it and how you will repay it. By doing this, your lender know that you have done your groundwork.
- Create A Winning Business Plan
You may have excellent business idea; however you’ve got to convince your lender that you may take it away. Your business plan will require an executive summary that explains what exactly your business deals in, how your business will make money and why the customers will pay for it. Additionally, write down about your market opportunities and possibilities and the competitive background and also the reason why you have an advantage.
- Get Your Paperwork Ready
Your lender will also need to evaluate some years of tax returns of your business, your certificates of incorporation and also your debt-to-equity ratio, which is the sum you owe lenders divided by the financial value of your business.
Your lender will need to know that you may pay off the funding by means of selling off resources, despite the fact that the business fails. Having any property that can serve as collateral is important. The lender wishes to see that you personally participate in this game. For collateral purposes, try and stick with business equipment and resources other than your home.
- There’s Always A Hope
It is easy for a medical practitioner to get a small business loan for expansion purposes as compared to a restaurant owner. It is all about statistics as the restaurant businesses have a higher risk of failure than other businesses. If you are a restaurant owner and are running into financial problems with the traditional lender, you can consider pursuing a loan from an alternative lender.
- Be Careful About Hidden Fees
If you need quick cash or experiencing bad credit problems, you may need to look into online or alternative lenders. But it is also advised to read the fine print before signing the dotted line. If you have any confusion regarding the loan terms, rates or criteria, you can ask your lender before applying. You can also get the help of your business attorney to evaluate the contracts to avoid any hidden fees.