Having a good small business loan requires preparation, this makes the process much easier.
In this article we have prepared a complete list, where we point out essential tasks that surely help, being essential to obtain the money you need for business expansion.
Small business loan tips
These tips apply to loans such as SBA, which is done through a financial institution, or if you have decided to take out an online loan that caters to small businesses.
Surely you should have the necessary knowledge by now, especially with all the requirements of lenders today.
Try to save your time and energy by knowing in advance if you meet all the requirements.
To help with this process, we have presented some steps to help you qualify for the small business loan.
Follow this step by step to succeed in your goals:
- Draw good credit scores
- Find out what qualifications required by the lender
- Provide as many guarantees as you can
- A well-designed business plan
- Have all the documentation you need
Learn the best way to qualify for a small business loan
1. Make good credit scores whether personal or business.
There is a slight variation when it comes to credit score, whether personal or business.
This can be between 300 and 900, remembering that the larger this variation will be more interesting for your projects.
This type of score required by small businesses is for banks to perform an analysis where they can measure their ability to settle personal debt.
This includes payment methods such as credit cards, mortgages, vehicle loans, etc.
In the case of FICO scores, usually when it comes to loan decisions, they have at least 5 important factors:
- The status of your payment history averages 35%
- Credit card as well as other types of debt, accounts for 30%
- How much credit you have, would be about 15%
- Credits currently in use, total 10%
- All recent credit inquiries 10%
Score Required by Lenders for Small Business Loan
To feel what your debt management is like, small business lenders may require a type of personal credit score, this for normal loan applications.
Something that in general trade is a basic rule, would be the payment of bills on time, this contributes greatly to the growth of this score.
Credit report errors are detrimental to your score, but it can also keep your accounts balanced.
These errors are common in everyday life, representing a negative factor in a credit report.
The Annual Credit Report provides a copy of these reports, free of charge once a year.
When seeking small business loan applications, the most established may look for commercial credit notes.
In general they vary from 0 to 100, being established in at least 5 steps to have commercial credit.
Small Business Loan Require Good Credit Score
A good credit score is decisive when trying commercial credit. Personal credit also influences eligibility for the SBA loan.
The results depend on the individual lender, among other business aspects, such as revenue and cash flow.
When it comes to online lenders, they make these personal credit score assessments, but sometimes they may behave with more demands.
These cases sometimes require cash history as well as a certain amount of company time.
2. Know what qualifications required of the lender
Undoubtedly there will be a strengthening, with good chances of greater success when meeting the requirements demanded by the lender.
When looking for a small business loan, there will be flexibility if you find that there is a lower performance in some sector, where your business operates.
Although in others the chance of being approved may grow, even more if the required qualifications can be achieved.
With regard to the credit score by the borrowers, these may be required to maintain the minimum criteria. In addition to proof of business time and annual revenue.
Something quite negative when it comes to small business loans would be the history of bankruptcy and recent defaults.
Additional Requirements When Searching For Small Business Loans
In an attempt to find good loans, further backed by the US Small Business Administration, you will have to get some approval for additional SBA requirements.
The SBA usually maintains certain types of standards that will have to be met. Remembering that in this case only for small businesses.
A more qualified personal credit in addition to business income may be required for borrowers. As well as updating on all lines of government lending without prior defaults.
This will be detrimental to those who have delayed a federal loan, in the specific case of students or from government-backed mortgages.
Being on a list of companies that are not SBA positive can cause you to fail when looking for a small business loan.
In addition it is clear that your company has to act as a for profit business. This stage includes financial companies, life insurance, operating in the financial sector and real estate investments.
3. Provide as many warranties as you need
When thinking of a small business loan, there will be a need to demonstrate what the money usage planning would be.
This coupled with a commitment to prove good repayment ability with lenders.
Small business loan through a business plan
It is quite common to have to present a business plan that is very consistent, clearly detailing what your real objectives are, showing how this loan could result in profits.
Remember that this business plan should contain, above all, all current financial data.
Make a description designed to show that your business with this loan will have a good cash flow that will be important to cover business expenses.
This step conveys more confidence, with these financial institutions having a good chance of securing your credit approval.
What should contain in a good business plan for approval:
- Complete Company Description
- Demonstration of services or products
- Qualified team in business
- Deep industrial assessment
- Clear and descriptive plan of facilities and operations
- Efficient promotional, marketing and sales strategy
4. Get maximum documentation required by lenders
It is normal to require many supporting documents, where banks and other financial institutions apply.
These requirements may include at least the following list:
- Current personal and business income tax returns
- Supporting Balance Sheet Documents
- Detailed list with all personal and business bank statements
- Photo of your driver’s license
- Leasing contracts
- All commercial licenses