When applying for a small business loan, there are a number of things to consider in order for your loan to be accepted as quickly as possible.
As long as you are prepared and have done the research ahead of time, getting a small business loan does not need to be a stressful or difficult task. Here are a few tips to improve your chances of securing your loan and beginning your small business.
Create a fool-proof business plan.
Providing a complete business plan to the lender will show them that your loan is a low-risk proposition. Make sure you include a detailed description of how much you will need, what you intend on using each dollar for, and what your repayment plan will consist of. You can include relevant and conservative projections and cost-saving measures to take when the market is weak. The more specific you are, the more convinced the lender will be to provide you with your loan.
Make sure your personal credit history is in order.
Before approaching the financial institution for your loan, make sure you have a recent overview of your credit history. Information within your credit report is probably the most influential factor in your loan’s approval. If there is missing data, mistakes or inaccuracies, it may hurt your chances of getting your loan approved. You should obtain reports from all three major consumer credit rating agencies before submitting your loan application to the lender. If you already have a business, you should also provide a credit report for your business.
Provide financial and bank statements.
Owners with more than a 20 percent stake in their business are required by many loan programs to submit one year of personal financial and bank statements with the application. Strong financial statements can help you avoid putting up significant collateral at the request of the lender. If your financial statements are in order and show that you are capable of keeping track of your spending, the loan program will be more likely to trust your financial stability.
Be able to provide strong collateral.
Loans are not usually offered to those who have no real property to secure their loan. Providing solid collateral for your loan is essential in that it proves your commitment to the success of your business venture. Collateral is especially important for those applying for inventory, working capital, or equipment. Commercial real estate collateral for loans more than $250,000 must be appraised.
Have personal and legal information in order.
You will most likely be asked to provide personal information when applying for a small business loan. This will most likely include any previous addresses or names, education background, and any criminal record you may have. Some lenders may require you to provide a resume with previous management experience. You will also be asked to provide your income tax returns from the past three years. Any legal agreements for your business must also be provided, including commercial leases, franchise agreements, or business licenses.
Getting a loan approved may prove to be difficult if your forms and information are not in order. If you loan is denied, don’t be discouraged. There are many lenders out there and it may take time to find the right one. As long as your venture seems well thought-out and not a risky investment, your loan will most likely be approved.
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