Money and finance acts as a fuel for a business, whether big or small. Therefore, if you are already running a business and thinking of expansion or planning to start a new business all together, securing finance should be on the top of your priority list. The task is simple for an experienced business owner, but a newbie might find the process a bit overwhelming.
We have compiled a step wise guide for budding entrepreneurs; from choosing the lender to preparing a loan application that can actually improve your chances of approval, and everything in between. Here are some simple and easy to understand tips on applying for business loans and getting the best terms.
Tips on Applying For Business Loans & Securing Approval
Research Your Options
In today’s marketplace one can find countless funding possibilities, which makes choosing the one that best serves your requirement a daunting task. With enough research and a strategic approach you can easily find an appropriate lender for your business. Commercial banks can be a good option for traditional loans whereas micro lenders like crowd funding sites are great for small capital needs of under $10,000. Conduct a thorough search on which type of lender best serves your interest and study their eligibility criteria for loans. You must also gather substantial knowledge on business loans in order to discuss intelligently with the lender and get the best possible offer.
Create a business plan & determine the loan amount
In order to persuade the lending officer and qualify for a loan you will require a strong and foolproof business plan. Apart from considering your credit capacity, collateral and capital, banks will also make a detailed judgment of your confidence and comfort with the business plan. If you show them a virtually infallible plan with accurate revenue and expense projections, your chances of approval are bound to increase. You must also determine amount of money you realistically need to get your business up and running.
Pre-plan your repayment options
Prior to applying for a business loan, you must come with a repayment plan. Banks assess the risk profile of your business while considering the loan application and also look for what you are offering to give them in case you can’t repay the amount. A clear projection of cash requirements and a practical repayment plan reflects your capability and gives a higher chance of approval.
Gather required documents
While the criteria varies, most lending institutions require your annual income, bank statements, tax documents credit score, financial credit history and a proof of collateral. Each of these documents affects your loan capacity, for example if you are applying for a business loan with less than perfect credit score the chances of approval will be lower. In such a case you will have to get finance from loan site, which offer guaranteed approval to bad credit loans.
If you are able to prepare a sound loan application package with complete paperwork including your business plan, your resume, financial results and projections and your personal financial information, you can speed up the loan approval process.
These above mentioned core factors will help you successfully apply for a business loan and also improve your chances of approval.