The easiest way to quality for a small business loan is to make sure you are fully prepared. If you’re not sure what that entails, then keep reading to learn about the process. Whether you are considering an SBA loan or online small business loans, you should be somewhat knowledgeable about the process in order to eliminate unnecessary complications.
Building Your Credit Scores
When it comes to credit and small business loans in Kingman, you have to consider both your personal credit history and the credit of your business, unless it’s a start-up. Your personal credit score, often referred to as your FICO score, will range from 300 to 850, with the higher number representing good credit. There are five different factors that determine the number, which includes your payment history, credit card debt, types of credit, length of time you’ve had credit and recent credit inquiries. Of these factors, your payment history has the greatest bearing on whether or not you’ll get approved for a loan.
An interesting fact that many people don’t realize is that a large percentage of consumers have found errors on their credit report, according to findings of the Federal Trade Commission. Fortunately, those errors can be removed, which will increase your credit score. It’s been reported that 20% of consumers saw an increase in their credit score after reporting errors to the three credit bureaus (Equifax, Experian and TransUnion). You should also be aware that business credit scores range from 0 to 100 and the three credit bureaus used are Experian, Equifax and Dun & Bradstreet.
Understanding Minimum Requirements
As with anything in life, if you want to succeed, you might as well give it your all. The same applies to qualifying for small business loans in Kingman. It will be in your best interest to make sure you meet all of the requirements for qualification. For instance, borrowers usually have to satisfy requirements related to annual revenue, credit scores and years in business. But that’s not all, lenders will also look for any delinquencies and larger issues like bankruptcies.
If you’re applying for a loan that’s backed by the SBA, then you will probably face more stringent criteria that will require strong personal and business credit without any defaults. This means if you’ve been late on your student loans, there’s a chance that you won’t qualify. If that’s the case, you might be better off applying for a loan online because online lenders tend to be more lenient.
Compiling Required Documents
In order to simplify the process of applying for your loan, you’ll want to make sure you have all of the required documentation, which might include a copy of your driver’s license, Articles of Incorporation, business licenses, personal and business income tax returns, income statement, balance sheet, personal and business bank statements, commercial leases and a copy of your resume. Your resume will prove that you have the experience required to excel in business. You might be able to bypass the requirement of providing so much documentation by using an online lender instead.
Creating a Great Business Plan
In addition to serving as a guide for how you will conduct business, a great business plan can also show lenders how you expect to turn a profit. Your business plan will include financial projections, which can increase your chances of getting approved. Here are some of the other elements of a strong business plan: management team, company overview, product and/or service description, operations plan, industry analysis, sales and marketing strategy, and SWOT analysis.
In the event that something happens and the business fails, lenders will want another way to recover the loan, which is why they often require you to provide collateral for security. Collateral typically consists of equipment, real estate or inventory. If you are uncomfortable with the idea of providing collateral, there’s another option; you can choose an unsecured business loan instead.