Applying for a business loan can be long and tedious. Not only are there dozens of options to choose from, you have to know the terms of each one while also determining your own needs to figure out the best option for your business. To boost your chances of getting approved for a business loan, you’ll want to follow these tried and proven tips. Keep reading for 6 tips to make the business loan application process a breeze.
- Do Your Research
Before choosing a funding type, ensure you’ve done the research to ensure you’re choosing the right kind of financing. In the business world there are traditional loans, short term loans, SBA loans, and even loans meant specifically for purchasing equipment. To ensure you’re choosing the right loan option, know how much money you need to borrow, loan fees, and the qualifications for each loan.
To get a well-rounded picture of each loan type, be sure to read business loan reviews. Just as you read reviews before purchasing IT equipment, you want to ensure you’re choosing a loan that is worthwhile and fitting for your funding needs.
Aside from researching funding options, you’ll also want to look into available lenders. Lenders include commercial banks, local banks, credit unions, and direct online lenders. Search around to find a lender that offers the funding you need as well as the most agreeable terms.
- Know Your Risk Profile
When lenders determine how much funding to give you as well as the terms of the loan, they put together an extensive risk profile. One of the first factors that lenders look at is your business credit score and credit report. Lenders want to know that you make payments on time and don’t have a high amount of outstanding debt. Before applying for a business loan, ensure your credit is in good standing.
Lenders will also look at a variety of other factors including:
- Outstanding loans and debts
- Any business investors
- Business history (time in business, yearly income, etc.)
- Business assets
- Tax and financial statements
Understanding your risk profile will help with pinpointing any issues that you should resolve before applying for a loan. Your risk profile will also help with better understanding the terms that a lender provides you.
- Show Your Business on Paper
The documentation you provide to a lender will need to tell your business’ story on paper. This means you’ll need to have all of the details readily available so that a lender can get a full picture. Lenders will want to know specific information including the business’ name, Federal Tax ID, legal structure, information about business leadership, and financial statements.
Lenders may also ask for copies of your business insurance, tax filings, and information about potential collateral. Having all of this information readily available will make the application and approval process much faster.
- Have a Spending Plan
Lenders will want to know what you need the funds for so that they can determine the feasibility of your loan application. Be sure that you can provide plenty of details as to why you need the money. For example, if you’re going through a period of business expansion, provide the lenders with the numbers as well as plan of what items will be purchased, such as more equipment or a larger storefront. Business lenders want to know that the money they’re providing is going towards a good use.
- Talk With Your Business Experts
To best position your company, you’ll want to talk with your financial advisor before applying for any business loan. Meeting with your board of directors and accountant can help to ensure you’re borrowing the right amount and that you’ve selected the proper loan.
Talking with the experts helps when it’s time to come up with a detailed plan. Lenders will also see you as less of a risk if you’re not going into the borrowing decision on your own.
- Loan Wisely
To be successful in the business world, you have to know how to loan wisely. Avoid the pitfalls of applying for too many loans or using the wrong loan for certain expenses. Wise loaning can help your business grow but borrowing money that leaves your company in a financial bind is never ideal. Always do your due diligence to ensure you’re only borrowing what you need and what you can afford to pay back.
Once you’ve determine that you need a business loan, you don’t want to make the decision lightly. Researching and having the proper paperwork available with make the process much easier for you as a borrower. No matter if you’re loaning $5,000 or $500,000, keep these tips in mind to make the application process much smoother.