Things You’ll Need To Be Approved For A Small Business Loan
If there’s one thing you need to successfully run a business, it’s money. Without the necessary capital to cover operational costs and business-related expenses, maintaining a profitable organization is impossible. Novice entrepreneurs often find out the hard way that keeping positive cash flow isn’t as easy as they’d like. Anything from a delay in accounts receivables to a decline in sales can reduce the amount of money they have to keep pushing forward. In instances like these, they turn to lenders for help.
Borrowing money to keep your business afloat and/or to grow your business is very common. Being prepared can help improve your chances of getting approved for an unsecured small business loan. However, if this is your first go-round, you may not have any idea what is expected of you. Below, is a brief breakdown of what you’ll need to submit to banks or online lenders to receive your funding.
Good Personal and Business Credit
Though your personal and business finances are separate, when it comes to applying for a loan, lenders are going to look at your personal credit as well. This is especially true for entrepreneurs who are trying to get funds for a startup or who don’t have much business credit. You’ll want to review your credit history and ensure that it is in good standing. If not, you’ll want to try and clean it up before applying. Remove any old or inaccurate ratings, make timely payments on all accounts, and try to settle with any collection or delinquent accounts.
Personal and Business Legal/Financial Documents
During the small business loan application process, you will be asked to supply the lender with supporting documents. You’ll want to make sure you have these things ready:
Income tax returns (personal and business)
Income statements and balance sheets
Property leases (if applicable)
Financial projects (for new businesses who have not been in operation for very long)
A Business Plan
Lenders are interested in learning what you will do with the money if approved for the loan. They also want to know that you are a low-risk borrower and have the ability to repay the funds. For these reasons, they may ask you to provide them with a business plan that details how the funds will be used and how you intend to increase your company profits to repay the loan in a timely fashion. Your current and/or projected profits should clearly outline for lenders how you intend to cover the cost of running the business as well as the new loan payments. Be sure to include the following:
Company and product descriptions
Marketing and sales tactics
Depending on which lender you decide to apply with, you may be required to provide some form of collateral to be considered for the loan approval. This needs to be an asset (personal or business), like a house, car, inventory, or equipment. By providing them something of value that can be seized if you don’t repay, this lowers your risk as a borrower and improves your chances of getting approved.
Note: Not all lenders will require you to have collateral. So, if you’re new to the business or simply don’t have anything to offer as collateral try looking for an online lender who has less strict requirements.
Before applying for a small business loan of any type, make sure that you have all your ducks in a row. All of the above information may be required of you and the sooner you can present it, the faster the process will be. If you’re unsuccessful at getting approved for a loan, there are other options for funding your small business that you can consider.