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.
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.
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.
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.
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.
As a small business owner, you have a lot of responsibilities. One of these is finding the right source of funding for your upcoming projects and overall business growth. Small business loans are one of many ways to get your business the funding it needs to move forward.
Delancey Street offers all kinds of financial products including merchant cash advances, small business loans, and business lines of credit. Business loans are available for all business types, regardless of industry, and are given in amounts up to two million dollars. With these types of loans, you can expect…
- Moldable Repayment Plans To Fit Your Needs
- A Quick Approval Process
- Funding In As Little As Two Business Days
- No Limitations On How You Can Spend The Money
- Bad Credit Acceptance
As you can see, there are many advantages to getting a small business loan with Delancey Street. However, before you run off and apply for a loan, it’s important to ensure that your business is in need of a small business loan and not another form of financing. Each business goes through its own growth cycles and undertaking a repayment plan for a business loan is something that you must consider to ensure that you will be able to comfortably repay the debt at this point.
Filling out an application is not the first place that you need to start when thinking about a small business loan. In fact, applying for a loan should be the last step that you perform. Let’s take a look at the other necessary steps you need to undertake before even filling out an application.
1.) Pull Your Credit Score – Since loan approval is highly based on your credit scores, it’s very important that you understand what those are. For a small business loan, both your personal credit score and the business’s credit score will be evaluated. You can get copies of these at the online credit bureau websites for the respective credit score.
Take a look at where your scores are compared to the indexing scales, which you can also find a slew of online resources explaining. Those with a good to great credit score have proven that they can successfully manage their finances. They’re more likely to completely pay back the loan without defaulting. For this reason, those with a good to great credit score are going to receive the best loan terms and rates available.
Those with lower credit scores won’t have access to the best loan terms as they’ve shown through their past credit history that they’re not responsible when it comes to managing their finances. These borrowers possess a higher risk of defaulting on the loan than those with higher credit scores. For this reason, these borrowers, if approved for a small business loan, will receive higher interest rates on their loan. If your credit score is currently on the lower end of the scale, you may want to invest some time in improving your credit score before applying for a loan. This will give you a chance to scoop up the best loan terms possible.
2.) Gather Your Financial Statements – You will be required to submit financial statements to your lender when applying for a small business loan. These statements give a snapshot of how the business’s finances are handled and the overall financial health of the entity. Common documents you’ll be asked to supply include, but are not limited to, a balance sheet, income statement, and cash flow statement. It’s a good idea to get these ready ahead of time so that you can submit them along with the application for a fast approval process.
3.) Understand The Purpose Of The Loan – While every business owner could enjoy having some more capital to play with, it’s never a good idea to just apply for a random loan without having a purpose. You should clearly know what the loan is going to be used for. When you know exactly what you’re going to be doing with the money, it goes a long way in convincing the lender to lend you the money to do so.