The act of applying for a small business loan can be intimidating. You are excited about the prospect of obtaining a loan to grow your business, but at the same time, you are worried about making a mistake that could have a negative impact on your finances.
Learning more about a small business loan does not mean you have to apply. Instead, you can use this process to better understand what goes into obtaining a loan, how it could benefit you, and which steps to take if you decide it is the right decision.
Every business is in a unique position. For example, you may be seeking a loan despite the fact that your credit is less than excellent. Or maybe you are buying a home at the same time you are seeking a business loan.
Regardless of your situation, there are things you need to understand about applying for a business loan, before starting the application.
The process of getting started is easier than most people realize. This is all about organizing your finances, knowing your options, and moving forward in the appropriate manner.
Here are two things you want to do before you get started:
One of the primary fears associated with a small business loan application is the amount of information required. There is no way around this, as every lender requires a variety of information. The U.S. Small Business Administration provides helpful information about loans and the financial documents required to apply for various types of loans.
Know what type of business loans are available, the terms and conditions associated with each one, and the process of applying. It may take some time to collect this information, but it will help you make the best decision going forward.
Many years ago, the only way to obtain a small business loan was to get in touch with a local lender and let them guide you through the process.
In today’s world, getting an online business loan is also an option. But, what does that mean for you? Where should you start? Let’s break it down:
Obviously, both products have benefits, but there are only two questions you should really ask yourself to decide where to start your search:
Bank loans are notoriously hard to get approved for. You’re going to need a 700+ credit score, strong revenues, profitability, and good cash flow. If this sounds like your business, you should probably start with a bank, as you stand a better chance than most, and to reiterate, a bank loan will always be the lowest cost capital available.
Even if you think you could get approved by a bank, keep in mind that the process could take weeks, if not months. If you need cash fast, your best option is going to be online. Many online lenders can get you funded in days, and it may be worth it for you to pay a little bit more to meet this immediate need.
Only you can decide which option is best for you and your company, but make sure to be honest with yourself about your approval chances, and what you really need this money for.
You’ve prepped for your loan search, decided where you want to start the search, so lets talk about what lenders will be looking for during this search. Now, every lender has different criteria they use to underwrite, but here are the most common factors these lenders will consider:
Before you do anything, review the business loan application in its entirety. If you have any questions, reach out to the lender before starting. This will clear the air and improve your chances of avoiding mistakes that delay the process.
As you move through the application, these tips are critical to your success:
Once you have an application in front of you, the only thing left is to complete it and wait for final word from the lender.
