Going into the process of applying for a loan can be stressful for small business owners. Great lending opportunities aren’t exactly abundant, and the application process is rather competitive. Financial institutions evaluate all of the applications that they receive with a high level of scrutiny in order to identify the businesses that will be able to meet the payment obligations that they’re committing themselves to. Do some research and strategic planning o give your business a good shot at getting the funding that you need.
Reach Out to The Right Lenders
If you’re looking for an SBA 7a loan, your options aren’t limited to local SBA chapter affiliates. Also, you don’t have to make your request with the bank where you do the bulk of your business banking.
Look at the online marketplace for vendors who work with businesses that are a lot like yours. Having some familiarity with current trends and consumer demand in various markets helps loan officers make well-informed assessments. When they know something about managerial logistics and revenue obstacles, they’ll have insight about your planned use of funds and your development track.
Get Your Credit Up to Par
Many lenders have firm criteria about creditworthiness that they must apply consistently when they are considering loan requests. If your business credit score falls short of a certain threshold amount, it could bar you from accessing a loan. Without the right credit score working in your favor, lenders may be unwilling or simply unable to consider any other aspects of your application because of their internal policies about essential criteria or applicants.
Check your score regularly. Don’t wait until a week before you plan on submitting a loan application because that doesn’t give you any time to meaningfully raise your score. Furthermore, you definitely wouldn’t have time to dispute negative remarks or address errors on your business credit report that shouldn’t be there. There probably isn’t any explanation about problems with a credit report or score that would make lenders look past them. They must interpret your report and score at face value.
If your most recent credit check indicates that you’ve got work to do, try to make some headway before you put in an application for a loan. A new line of credit could offer you some financial help short-term, but utilizing too much newly available credit will bring down your score. You need to keep your credit utilization healthy to keep your score in good standing. Likewise, you need to make timely payments on all of your active tradelines to be able to establish and maintain your business’ creditworthiness.
Organize Financial Information Meticulously
Well-kept financial records show lenders that you have all your ducks in a row and you’re not meandering through financial management. Ideally, you should already be using a great accounting program that facilitates excellent recordkeeping practices. In addition to tracking expenses and revenue, you may find it helpful to use software that’s capable of generating detailed reports comparing changes. By showing lenders graphical representations of how well you’ve managed to drive up revenue month after month or quarter after quarter, you can inspire confidence about your aptitude to achieve growth consistently.
Lenders also like to see that you’re conscientious about managing costs and using your resources well. Your records about expenditures in addition to the most recent iteration of your operating budget will give loan officers a detailed picture about your company’s basic overhead needs.
Craft a Compelling Narrative
While credit scores and key financial data are extremely important, it is imperative that you don’t overlook the importance of a business plan in your loan application. Give a clear account about your company’s mission and values. Underscore what makes your business exceptional.
In particular, you have to convey how your use of loan proceeds is going to enable your company to continue doing great work and enhance earnings. Be precise about what you’ll be spending proceeds on. Approximations of costs or overly vague descriptions of various planned activities may be seen as a red flag.
Ultimately, thorough due diligence and preparation can get you in good shape to get an approval. The right lending opportunity could equip you to take your small business to new heights.