If you’ve been thinking about finding small business loans in DC to help grow your business, then you’ll find the information below helpful. Whether you’re looking for an SBA loan or an online small business loan, you should be aware of the basic requirements so that you’re better prepared and know what to expect.
Improving Your Personal and Business Credit Scores
There’s often a lot of discussion about credit scores, but most people only have basic knowledge of how their score affects their finances. The range of personal credit scores is from 300 to 850 and the higher your score, the more likely you are to obtain a loan at a good rate. As a matter of fact, it’s one of the primary factors used in making critical lending decisions. The basis of the actual score is your payment history, credit card debt, amount of time you’ve had credit, the kind of credit you have and your recent credit inquiries.
Sometimes there is inaccurate information on credit reports that should be addressed. The first step is to obtain a free credit report from AnnualCreditReport.com and dispute any discrepancies by contacting all three credit bureaus, which are Equifax, Experian and TransUnion. Business credit reports are handled differently – the business credit score range is from 0 to 100 and the three bureaus that handle these reports are Experian, Equifax and Dun & Bradstreet.
Meeting Lender Requirements and Qualifications
One of the best ways to increase the chances of your loan application getting approved when applying for small business loans in DC is to either meet or exceed the minimum qualifications. In order to do so, you’ll need to have a good understanding of those minimums, which may involve the number of years you’ve been in business, your annual revenue and your credit score.
There are other considerations, such as past payment delinquencies and defaults. Loans that are backed by the SBA tend to have stricter requirements. For example, there’s a list of ineligible businesses that include financial, life insurance and real estate investing companies. One reason why some people opt for online loans is because they often have fewer requirements than traditional loans. Although the process tends to be faster, these types of loans can be more expensive.
Gathering Required Documentation
Traditional lenders, including banks often require a variety of documents during the lending process. This may include income tax returns, your driver’s license, Articles of Incorporation, commercial leases, business licenses, bank statements and an income statement. Sometimes you must provide your resume in order to demonstrate your related business and management experience.
Providing a Comprehensive Business Plan
Whether or not you decide to apply for a small business loan, it’s a good idea to have a business plan. It’s often requested during the lending process because your business plan can demonstrate the strategy you have for increasing profits. It’s also a way to communicate how you plan to allocate the loan. Your business strategy should also have financial projections that clearly demonstrate how you intend to repay the loan.
Here’s a snapshot of what should be included in the business plan: company overview, industry analysis, operations plan, products and services, sales and marketing strategy, management team and SWOT analysis (strengths, weaknesses, opportunities and threats).
Understanding Collateral Requirements
Some small business loans require collateral as backup, which is a way in which lenders can recover the loan should your business fail. Collateral can be real estate, equipment or inventory. Sometimes the owners of a business are required to provide a personal guarantee, which means you will be personally responsible for a default as opposed to just the business being responsible.
The good news is that you have the option of applying for an unsecured business loan if you can’t provide collateral. The best thing to do is ask questions about collateral requirements so that you can make an informed decision.