A small business loan can help a business grow, help the company expand into even bigger areas, and increase its marketing efforts. Below are six steps to help borrowers apply for small business loans.
- Decide on the type of loan that the business needs
There are different types of loans that can be used to support a small business. These include, but are not limited to, Traditions Bank Loans, Small Business Administration Loans (SBA), Online Loans. They all depend on the needs of the borrower and his or her ability to repay.
- Familiarize yourself with the rating of borrowers by various banks and lenders
Most lenders and banks grant loans with the expectation that payments will be made on the agreed date. Because of this, most of them will want to make sure that the borrower is able to meet the agreements.
You might consider checking your cash flows, credit history, length of business, and creditworthiness.
- Decide on the lender
After researching the qualifications required for the given loan and deciding how to finance their business needs, it is time to narrow down your search. Most lenders rely on the income and interest they receive from the borrower’s lending business.
Some of them could contain clauses that could put the borrower’s business in a difficult position. So you have to decide whether to need a direct lender, go for peer-to-peer lending, or use the loan marketplaces and get a loan based on their qualifications.
- Know your chances of getting the loan
When applying for a small business loan, you may end up hopeful and later decline the loan. It is important to know the lenders with whom they stand a chance so that they can spend those long hours wisely applying.
For example, they will find it difficult to get a bank loan if they have a credit score of less than 700.
- Gather the necessary documents
Many loan applications require the right documents to be approved. This can include the IRS documentation, their business bank statements, business / personal creditworthiness, a business plan, and any required legal contracts.
According to Lantern Credit, credit scores can be a good indicator of how responsible the borrower has been in paying past debts and can give lenders an idea of the risk they might pose.
- Fill out the loan application
With the right documents, this step should be easier. You should ensure that they provide accurate information when needed and not fabricate anything about themselves or their business.
After the application, the waiting time is usually between 24 hours and six months, depending on the type of loan applied for.
While some may find the process a bit tedious, the benefit that an approved loan can bring to any business in the future is undeniable. For those with poor credit looking for small business credit, it helps to start improving now.