Although you certainly don’t have to be an expert financial planner or have deep knowledge of lending requirements, it is important for you to get all of your ducks in row in order to qualify for a small business loan. As with just about anything in life, preparation can mean the difference between success and failure. Whether you want to obtain a loan to start or grow your business, you’ll need to get prepared.
Qualifying for a Small Business Loan
Whether you’re seeking small business loans for women in Texas or any other kind of loan product, one of the first things you’ll need to do is make sure you have a high credit score. Since you’re looking for a business loan, you’ll need to consider both your personal and business credit score. As you probably know, your credit ranking is often referred to as a FICO score, which is the standard system used to make lending decisions. The FICO score range is between 300 and 850, and 700 or above is considered a good score. If you already have a good score, great! If not, don’t panic, you’ll just need to do the work to boost your score.
Understanding the Lending Requirements
Next, you’ll want to study the requirements of lenders to determine where you stand. There are a wide variety of loan products in the marketplace that can be obtained through banks, credit unions, the Small Business Administration (SBA) and other financial institutions. Regardless of which one of these entities you choose, you’ll want to be familiar with their lending requirements. The goal is to understand and meet the criteria before you even decide to submit an application. You’ll want to keep in mind that each lender is likely to have a different set of requirements and the strength of your application depends on your alignment with their criteria. Some lending institutions place more emphasis on personal credit, while others focus more on the revenue and credit history of your business.
Providing Legal and Financial Documentation
As you probably imagined, applying for a loan will require you to provide a variety of legal and financial documentation that might include Articles of Incorporation, tax returns, balance sheets, bank statements, leases and business licenses, among others. In order to expedite the application process, you’ll want to have the necessary documents prepared in advance. Quite frankly, the documents required are typically items that are easily accessible, but may take time to produce in entirety. However, there might be some documents that you wouldn’t necessarily anticipate needing to provide, such as a resume that communicates your related management and business experience.
Creating A Business Plan
These days, it’s easy to launch a website and call it a business, but savvy professionals understand that it’s best to have a business plan to increase your chances of success – which is why most lenders will want to see your business plan. Simply put, they want to make sure you have a plan for increasing your profits and repaying the loan. Your business plan will also provide details on how you intend to use the money that you’re borrowing.
Backing the Loan with Collateral
One of the most important aspects of the lending process is providing collateral. This is important because lenders want to know that they can recover their money if you are unable to pay back the loan. Common forms of collateral include real estate and equipment, but as with other aspects of the lending process, acceptable forms of collateral vary depending on the lender’s requirements.