If you’re a small business owner, then you are probably acquainted with the difficulties of managing a business when your resources are limited. If you’re thinking about getting a loan to take your business to the next level, then you’ll find the information below helpful. Whether your goal is to secure a bank, SBA or online small business loan, getting prepared can simplify the process.
Improving Personal and Business Credit Scores
Most people only have a vague understanding of credit scores. When you’re in the market for small business loans in IA, you should be familiar with both your personal and business credit scores, especially if you have been in business for a decent amount of time. Your personal credit score can range from 300 to 850 – you want it to be as high as possible. Also called a FICO score, your personal credit score is a product of these five factors: your payment history, how much debt you have, the types of credit you have, the amount of time you have had credit and recent credit inquiries. Of these factors, your payment history is the most important.
Even if you always pay your bills on time, there’s a possibility that there are problems with your credit report. The Federal Trade Commission reported that a significant number of consumers found detrimental errors on their credit report. The good news is that they were able to eliminate the errors, which often increased their credit score. To get a free copy of your credit report every year, you can visit AnnualCreditReport.com. If you find inaccuracies, you can work with three credit bureaus (Experian, TransUnion and Equifax) to ensure the corrections are made. If there are issues with your business credit report, you’ll work with Dun & Bradstreet, Experian and Equifax. This can be important, especially if you’re interested in SBA loans – they require strong personal and business credit.
Understanding the Lender’s Minimum Qualifications
When seeking small business loans in IA, in order to maximize your chances of loan approval, you should try to meet all of the minimum qualifications. As a matter of fact, it wouldn’t hurt to exceed their criteria if possible. While most lenders consider the strength of your application in totality and offer flexibility, that’s not always the case. SBA has additional requirements and tend to be more rigid. On the other hand, online small business lenders are often more lenient. Generally speaking, minimum qualifications involve your annual revenue, credit scores and years in business. Lenders will also look for bankruptcies and delinquencies, which can pose a problem.
Compiling the Required Documents
Most traditional lending institutions will ask you to provide various legal and financial documents that often include Articles of Incorporation, business licenses, bank statements, a photo of your driver’s license, income tax returns, income statement, balance sheet, commercial leases and your resume to assess your business acumen and management experience. Given the number of documents required, it can make the application process long and time consuming. If you don’t like the idea of having to provide so many documents, you might want to consider an online small business loan, which usually doesn’t require as much information. If you have strong credit scores, you might find a rate that’s comparable to traditional lenders.
Creating a Solid Business Plan
If you don’t already have a business plan, you’ll need to develop one that includes the purpose of the loan, financial projections and how you plan to increase profits. Here are some of the common elements that you should include: Company overview, industry analysis, management team, products and services, sales and marketing strategy, operations plan, and SWOT analysis (strengths, weaknesses, opportunities and threats).
There’s a chance that you may be required to provide collateral in order to qualify for a small business loan. Collateral might include real estate, equipment or inventory. Lenders want to make sure they have a recourse in the event that you go out of business. If you don’t quite like the idea of providing collateral, you might want to consider an unsecured business loan.