Small Business Loans: How to Obtain Them
Business owners have several options when deciding to apply for small business loans. Understanding how to obtain loans and taking steps to get ready to submit credit applications are often the first steps in accessing needed funding for the business.
Review Your Credit Report
Most lenders will examine your company’s and your personal credit reports when underwriting a loan application. Understand what information will be available to creditors and correct any misinformation before you begin the application process. Since lenders typically look for a track record of on-time payments, it’s never too early to start building a positive payment history with current creditors and vendors.
Assess and Update Your Company’s Online Presence
Part of a lender’s due diligence to determine the character of your business is looking through readily available online information. Make sure your website looks professional and is up-to-date. Review posts on your company’s Facebook, LinkedIn, Twitter and other social media accounts. Make sure the sites are active with relevant content. If customer comments have been posted, they should be responded to appropriately. Look through reviews on consumer sites such as Yelp to understand the type of impression your lenders will have about your business practices, since they’ll most likely look at these sites as well.
Prepare Thorough Financial Statements
Regardless of loan size, lenders typically review the applicant’s financial statements to analyze cash flow and the ability to service debt payments. They may also consider assets including accounts receivable balances and equipment or property that can be used as collateral, plus any other short- and long-term liabilities that are already on the books. It is important to understand your financial position and be prepared to discuss your numbers in great detail.
Know How You’ll Spend the Money
Many lenders want to know how their money will be spent to benefit the company prior to approving small business loans. Will you be purchasing equipment or property that can be used as collateral? Or will money be spent on raw materials, inventory, hiring or renovations? Show the lender how the company will be in a better position after the money is deployed and how the investments will put the company in a stronger position to repay the debt.
Educate Yourself on Options
There are numerous types of small business loans and alternative financing options available. Educate yourself about the options to understand how to meet common requirements. Research financing terms and costs to help understand which type of credit best serves you. Early preparation frequently helps small business owners qualify for funding once they need it.