Small business loans don't have to be scary, if you follow these tips.
So you own a business and business is good, it’s so good in fact that you can’t keep up with demand and the time has come for you to consider taking out a loan. Small business loans are a great way to get an influx of cash into your business when you need it, whether it’s to buy new inventory, jump start your marketing campaign or to expand your team. But like any undertaking in life it’s important to be prepared and applying for a business loan is no different.
1. Know your business.
Lenders want to know that the people they’re lending to are a good bet. So beyond knowing how your business is doing make sure to get an idea of how the industry is doing, keep up to date on trends and any changes in regulations that may affect your business. You want to show the lender that not only are you a great borrower, but you really know your stuff.
2. Know your score.
Before going out and applying for a loan (of any type) it’s important for you to take some time and find out your personal and business credit score. It’s a fast and easy process and can help you get an idea of where you stand as a potential borrower for banks and other lending institutions. The higher the score, better candidate you are for a loan. A business credit score is very much like your personal credit score, but it’s specific to your business, monitors trade payments such as credit lines and leases, public fillings such as judgments and tax liens and overall financial stability. It’s important to make sure that all the information on it is accurate so that there’s no unnecessary delays when getting your loan approved.
3. Gather your documents.
Just like with a mortgage or home equity loan banks will want to see your tax returns and bank statements, but when applying for a business loan they’ll also want to see a few things that are specific to your business. If you’re a doctor’s office the bank will want to make sure that you’re properly accredited and licensed. If you are a manufacturer they’ll want to make sure that you have the contracts in place that will justify the purchase of a new machine. Like with all things in life the exact answer of what documents you’ll need is… it depends. It depends on your business, it’s cash flow, how long you’ve been in business, the size of the loan, what your credit score is, the list goes on and on. To be safe we recommend having at least 1 year’s banks statements and 2 years of personal and business tax returns as well as any relevant documents for your specific business that will help the lender make an informed decision.
4. Know how much you need.
The amount you request on your loan documentation is one of the most important numbers on that form, so it’s important that you do your homework first. Take a look at your credit score, your expenses, your debt schedule before deciding on an amount. A bank won’t want to lend you money if they think you won’t be able to afford the payments.
5. Know what you need it for.
As important as the amount you request, what you plan on using the money for is just as important. Banks want to know that you have a plan for the money they’re lending you, so be specific. If you’re a clothing manufacturer specify if the loan is to finance the purchase of new fabric or a new piece of equipment. If you are a company specializing in logistics are you using the loan to fund the purchase of new software. Have plans to remodel the office, explain how this will help to better accommodate new hires and increase productivity.
Applying for a business loan may seem like a large undertaking, but it doesn’t have to be. If you’re prepared and knowledgeable the process will be quick and painless. To learn more about LiftForward and it’s lending solutions give us a call at (888) 514–6539 or visit us at www.LiftForward.com.