5 Steps to Prepare for a Small Business Loan Application

You’ve hit a wall in your business growth. You need more working capital. A small business loan may be the most secure and cost-effective approach to receive the capital your firm need. The requirements can be stringent and the application process can be extensive.

Here are five strategies for securing a small business loan.

1. Prepare to Explain the Reasons for Your Loan

In order for a lender to approve your loan proposal, they will need to see a convincing reason for the funds. If you are just going to use the money to pay off other debts, lenders will not be impressed. They want to see that you will use this new working capital to grow your business and increase your revenue, making it easier to repay their loan. Get specific in your needs and lay them out clearly for lenders.

2. Prepare to Qualify

When deciding whether to loan you money, a lender will want to know your business credit score, how long you’ve been in business, how much your company brings in annually and how you plan to repay the loan. If your credit score is too low or you have not been in business you may not be able to qualify for certain small business loans and may have to apply for alternative funding.

3. Prepare to Apply for the Right Loan Type

Fortunately, there are plenty of different types of business loans to choose from. With good credit and several years of business history, your options are wide open. SBA loans offer credit interest rates and terms. A business line of credit could also work for short-term needs. Invoice factoring is a good choice if you have lots of purchase orders. For those with less-than-perfect credit or just getting started in business, lending options like crowdfunding, business credit cards, and even personal loans might help your cash flow needs.

4. Prepare to Apply with the Right Lender

Banks and credit unions are among the most traditional lenders, but they also employ the strictest credit standards. Microlenders help those with small companies and small loan needs, and online lenders provide funding to companies in need of cash fast. Research all the choices to know which is the best fit for your company.

5. Prepare the Documents for Small Business Loan

Almost all loan applications will require the same type of documents. These include business and personal tax returns and bank statements as well as financial statements and any documents showing the licensing of your company. Pulling these together beforehand can save you time and headache.

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