Owning a small business has never been easier, there are so many resources available to help grow a business.
With the invention of social media and the changes in distribution methods, it has become a thousand times easier and, cheaper to market a business.
A small business may not require a lot of capital, but, some amount of working capital is always in need. It can be for buying an equipment or just running the day-to-day cash flow. A small business loan can really help a business grow into its true potential.
Now, we know borrowing money means a great deal of work and a tremendous amount of stress in the form of paperwork, documentation, interest rates and what not! Your business plan will be tested and questioned at every step, before you can even THINK of getting some additional resources.
You have already done the hard part, finding the business idea and investing your time in it. Don’t let cash get in the way!
There are a few things that you can do, to make your life, your lender’s life and the application process a lot easier.
Here are SEVEN tips to help you get the money you need with an application process that is tiresome:
1. Bank is not the only option
Maybe your credit is not the best, and the bank you are going to is not willing to give you a deal. They may have an extremely high interest rate, that you just can’t afford to pay.
There are ALWAYS, other financing companies who will not only provide you the loan but also get you a reasonable interest rate. Talk to a few lenders before you choose the right one.
2. Do your research
Research! Research! Research! It is an absolute necessity to do your research. Talk to different lenders and ask them about their interest rates and their down payment requirements.
The best way to do that is to go out and talk to quite a few lender companies or find a financial advisor.
3. Know the loan amount
A lender will say NO, if you are unsure of the money you’ll need for the business loan.
Develop a business plan which clearly outlines every area where you’d spend the money. Make a detailed report, so that your lender is aware of all the expenses and the risk factor involved. Show records of your payment history and provide all the documents that lenders ask for.
Some of the documents that your lender might need are:
A business plan, business and/or personal tax returns, and your latest financial statements.
A lender needs proof that you can be reliable. Make sure they can look at your finances and know your goodwill.
4. Know about the ‘Five C’s’.
Always consider the five C’s when looking for a loan. Here’s a quick list, so you can remember them all:
Capital: How much do you need?
Capacity: How will you pay back the loan?
Conditions: How is your business doing?
Collateral: What will you provide to secure the loan?
Character: what is your creditworthiness?
5. Work on your personal credit
When you have a small business, business is personal! Which means that credit score matters. You should aim to have a credit score of 700 and plus but sometimes, that is not the case. In that scenario+, ask the lender upfront about their credit score requirements.
You can always take some time and work on your credit as a good credit score will open more avenues for you.
6. Have enough for the down payment
Different lenders have different down payment requirements but be prepared to at least put down 10-20%.
If you have a mortgage or a car loan, you know how it works!
A lender will make sure you have enough before he finalizes the loan. There maybe some lenders who do 0 down payment, but you need to check with them to make sure they do it.
7. Be truthful
You may think you can bluff your way through the application process. Lying about finances and showing fake financials can cause a lot of problem for you and your business.
It will affect your business’s integrity and would put you in a lot of trouble. Be honest and you will get what you want, even if it takes a while.