Many small business owners new and old have considered a small business loan. Whether it’s to open the doors to a new business or to upgrade an existing business, a loan will help. Getting a small business loan is easier than ever with many different options to choose from. Applying for the loan is easy if you have the proper foundation prior to submitting an application. This article will review the steps entailed in getting a small business loan and will cover several options that may be available.
A great business plan is the foundation of getting approved for a small business loan:
You probably have some great ideas for your business. Articulating and illustrating those points in a well-composed business plan is critical. A business plan shows the lender that you’re serious about making your business a success. You’ll be able to showcase your ideas and present them to the lender. Selling your new or existing business ideas is the key to getting a loan. If you don’t have a business plan written, there’s a significant amount of information, courses, and even videos available on the web. Another option is to consult with an expert in the field that can help you write a business plan. Many freelance authors are also able to provide you with a winning plan. It’s rather important that you’re clear in your expectations and the information you provide. Once you have your business plan and presentation ready, you’ll be able to move to the next steps.
Inspecting your credit report:
Checking your credit is also a necessary step in preparing to get a loan. You can get a copy of your credit report from the credit bureaus themselves, or through an online service provider. Once a year, the credit bureaus will provide you with a free report for the asking. Also, if you’ve been denied credit they’re required by law to provide you with a free report. Credit monitoring websites like Credit Karma will provide you with free or low-cost options. It’s also worth considering paying for a merged credit report. These reports consolidate all three credit bureaus into one comprehensive report. Also, make sure that the option you select provides you with a credit score. Many times, lenders will go by the credit score alone. The most common score is the FICO model. This is your definitive credit score according to many lenders. It’s worthwhile to keep an eye on this number. If you have an existing business, it’s important that you inspect that as well.
If you have credit concerns:
Having a blemish or two on your credit report is typically overlooked by most lenders. Many blemishes are a cause for concern. It’s best to simply resolve any outstanding negative items prior to applying for a small business loan. If you’re unable to do so, you may want to seek credit repair services. Credit repair companies will attempt to have any negative items removed from the credit report. They’ll challenge the debts and often times they’re successful in having the items removed. This takes a little time and patience. The turnaround time can be nearly two months in many cases. Also, they’ll have a limit to the number of items they’ll dispute at one time. These services can be well worth the time and money for many borrowers. If you have documentation of inaccuracies on your credit report, you can also challenge the items yourself. However, it’s important to reiterate that you’ll need proof that there’s an actual error. Once you’re able to resolve your credit concerns, you’ll be ready to start exploring your options.
Traditional small business loans are a great option for many borrowers:
A traditional small business loan is typically government backed by the Small Business Administration. This means that you’ll have to conform to their underwriting standards. Local banks typically process and fund these loans. A solid business plan, assets, and credit score are typically required. They’ll also want you to make an initial equity investment into the business. Providing you can meet all of these standards, you’ll most likely be able to get an approval. The SBA also provides grants and incentives for certain demographical areas and borrowers.
Private investors and venture capital lenders may work better for some borrowers:
If you have great ideas but some credit issues, private investment firms may be your best option. This is also an option that many existing businesses opt for. These companies place more of an emphasis on the chances of your business succeeding than they do on your personal credit. A winning business plan and presentation are critical to being approved. You’ll also be asked many personal questions during a formal interview. The lender is trying to make sure you’ll be able to carry out the plans you’re proposing. If they love your ideas, they’ll provide you with the funds you need for a share of your business. They’ll have some level of control over your business so it’s important that an attorney review what you’re agreeing to. They can also negotiate the contract for you. This option is also good for those who’d appreciate a little guidance in the operations of their business.
Merchant credit advances have recently become a popular loan option for existing businesses. This option provides an advance on processed sales that have yet to be deposited. The underwriting process is quick and simple providing almost instant results. A heftier premium is likely due to the convenience factor.
After you apply:
Now that you’re closer to the loan you’ve been wanting, you’ll need to stay engaged in the process. Providing documentation quickly will help the process along. Stating any potential issues will also help the lender in processing your application. After approval, you’ll receive your funds and be ready to open or improve the business you’ve been dreaming of. Simply keep up on the payments and you’ll be building your business’s credit which will be beneficial in the years to come.