Qualifying for a Small Business Loan
As you are probably aware, one of the first things you’ll need to do when considering a small business loan is assess your credit score, which is also known as your FICO score. Your FICO score can range from 300 to 850 and is what’s commonly used to assess your creditworthiness. Essentially, your credit score is a key factor used to determine whether you will qualify for a small business loan based on your financial history. While 700 and above is considered a good score, when applying for small business loans in Glendale, keep in mind that each lending institution has its own requirements.
If you don’t currently know your score, you can obtain a free copy of your credit report every year from annualcreditreport.com. You should also be aware that the three credit bureaus from which information about your credit is obtained are Equifax, Experian and TransUnion. You can also contact these credit bureaus if you determine that there are inaccuracies on your credit report. If you have a business that’s more established, then you’ll need to know your business credit score. The three business credit bureaus are Dun & Bradstreet, Experian and Equifax. You should also be aware that your business credit score will range form 0 to 100.
Understanding Lender Qualifications
Once you decide to apply for a loan, you’ll want to make sure you’ve done everything that you possibly can in order to be considered a strong applicant. The best way to achieve this goal is by understanding the requirements of your chosen lender. The minimum criteria will often involve your credit score and income. They will also consider other factor, such as how long you have been in business and whether you have had any bankruptcies in the past. If you’re looking at an SBA loan, then your business cannot be a nonprofit organization.
Gathering Required Documentation
As you move forward in the process of obtaining a small business loan, you’ll need to gather a combination of different financial and legal documents that will probably include balance sheets, bank statements, income tax returns, business licenses and Articles of Incorporation, among others. You might also need to provide your resume, which allows the lender to assess the strength of your business experience and management skills.
Preparing Your Business Plan
Most business owners have a business plan of some kind or another, which is one of the documents that lenders will want to see. The section of your business plan that provides financial projections will help lenders determine your ability to repay the loan. They also want to assess the strength of your business plan as it relates to the likelihood of profitability, which is another factor in loan approval.
The primary components of a business plan include a company description, an overview of services provided, a list of the management team, an operations plan, industry analysis and a marketing strategy. It’s also common to include a SWOT analysis, which details strengths, weaknesses, opportunities and threats to the business.
Providing Collateral for the Loan
In the event that you receive a small business loan and something happens that prevents you from paying it back, your lender will still want to collect on the debt. For this reason, you may have to provide collateral in order to back the loan. Collateral requirements vary, so it’s a question that you can ask during the loan approval process.