Embarking upon the journey of applying for a small business loan can be somewhat intimidating. One of the first things that you probably want to know is what you need to qualify, which is a great question that’s worth exploring. The information below provides an answer to that question. Whether your preference is pursuing a loan online, through the SBA or from a bank, there are ways to simplify the process and increase your chances of success. This applies to small business loans in KS and any other state.
What’s Your Credit Score?
One of most important aspects of getting approved for a business loan is your personal and business credit score. If your business doesn’t have a history because it’s a start-up, then the focus will be on your personal credit score, which can range from 300 to 850, with the higher number demonstrating a strong credit history. Your credit score, also called a FICO score, is determined based on many different factors, but the most important is your payment history because it’s 35% of your score. The other factors include the amount of debt you have, the kind of credit you have, the amount of time you’ve had credit and recent credit inquiries.
Interestingly, the Federal Trade Commission reported in 2012 that a significant number of consumers find errors on their credit report and by removing those errors, 20% of consumers saw a increase in their credit score. In order to start the process of assessing and resolving any issues, you can visit AnnualCreditReport.com, a company that provides a free copy of your report each year. If you identify any errors, you can contact the three credit bureaus (Experian, TransUnion and Equifax) to have them removed. You should also be aware that the range for business credit scores is 0 to 100 and the three credit bureaus used for that report are Dun & Bradstreet, Experian and Equifax.
What Are the Minimum Lender Requirements?
It’s always best to know what you’re dealing with before jumping into a endeavor and this applies to the process of applying for small business loans in KS. One of the first things that you’ll want to do is identify the minimum lender requirements and then make sure you either meet or exceed them. While each lender is different, most of them have criteria pertaining to your annual revenue, credit scores and years in business. But that’s not all, they also examine whether you’ve had any past delinquencies or bankruptcies.
If you’ve been late paying a student loan and you want to get a loan that’s backed by the SBA, then you’re likely to run into a problem. The SBA tends to have strict criteria, including an ineligible business lists that includes companies in real estate, insurance and banking. But don’t be dismayed, there are other options, such as online lenders who tend to be more flexible and can also fund loans faster than most traditional lenders. Just keep in mind that you might end up paying more for an online loan product.
Do You Have All of the Required Documents?
One of the best things that you can do when trying to obtain a small business loan is compile all of the required documents. You can essentially prepare everything that the lender needs in advance so that you don’t have to scramble at the last minute to figure out if you have what’s requested. Here are the documents that you may need to provide: income tax returns, Articles of Incorporation, your driver’s license, business licenses, income statement, balance sheet, bank statements, commercial leases and your resume. Your resume should communicate your business and management experience.
If you’re feeling a little intimidated by the amount of documentation that you might need to supply, then perhaps you’d be better off going with an online lender since they tend to offer a more streamlined application process. If you have good credit, then they may also offer loan products that are comparable to traditional loans.
Do You Have a Solid Business Plan?
Perhaps you’ve already developed a business plan with financial projections that spell out how you intend to increase your profits. If not, then here are the elements that you should include in your business plan: Business overview, industry analysis, management team, products and services, sales and marketing strategy, operations plan and SWOT analysis (strengths, weaknesses, opportunities and threats). Your business plan is a great way to develop a strong narrative that demonstrates your plan for success.
Do You Have Collateral?
There’s a good chance that qualifying for a small business loan will required to provide collateral for security. It’s basically a back up plan for lenders should your business fail and you are unable to repay the loan. If you don’t have collateral, then you should consider an unsecured business loan.