Whether you are a small business, or one trying to grow, a small business loan may just be the right solution you need. Know that there are several tools for your business disposal and you will need to follow some different steps. Getting a loan maybe a challenge, but whether it is at the beginning of your venture, or down the line, some small business owners find that they need financing.
There are some entrepreneurs that search for help when it comes to expanding their business. With the right amount of capital, you will be able to grow your customer base, acquire another business, raise equity, or develop a strategic network of partners. Regardless of your reasons to borrow money, you need to know that small business loans are not all equal. Some have stringent document requirements, and credit history, whereas others may have high-interestratesor some that the government guarantees.
If you are planning to grow through loans, then you need to know some things before the lending process, which should increase your chances that a lender should provide your funding. However, you should know there are some things that you may expect from the application process. It will be better for you to know what to expect to ensure you secure a loan.
When applying for a small business loan, here are some things you can expect and this should help you to secure the best loan for your small business.
Reviewing Your Personal Credit History or Business Credit
When you apply for small business loans, you need to remember some important things, which are, lenders will always try to mitigate all their risks. Lenders will then evaluate your application process by evaluating your application all based on how much risk they take when they lend you the money for the business.
Initially, several lenders, whether you choose traditional banking solutions or alternative lenders such as Orumfy, they would look at your personal credit score, since it will serve as the standard for knowing the debt of your credit history. Your company would have a business credit score, which is a lot different, compared to your personal score. This should depend on the length of time of your business and whether you have credit history such as a business credit card.
You need to know that lenders may not require you to have the best credit history for the approval of loans. There are different loan options available, but just as you may expect, the better the credit score you have, the better and greater the chances that you will have for its approval. In addition, it will help to open up more loan options. However, you should know that the higher the amount of the small business financing or loans, the better the repayment terms.
Evaluating Business Financial Health
Generally, lenders will scrutinize the financial health of your business, especially when it comes to long-term loans for longer periods for repayments. It should give lenders a clear picture of your company’s ability to sustain and generate consistent cash flow and whether you will be able to repay the loan or not. Hence, this is quite important for business lenders.
You should have a complete record of your business finances to be able to secure your loan. This way, lenders can have a definite idea of how well your company is progressing and whether you will be able to repay the loan or not in the days to come.
For some loan types, to be precise SBA loans lenders would want to dig into the personal finance information for co-workers and you in the business. At such times, you would not want to enter trouble off guard. In advance, you should get organized and know how to fetch the bank statements and return of tax and expect some paperwork.
Lots of Paperwork
Once the lender approves the loan to you, you will need to go through serious underwriting processes. This is exactly how banks will ensure that you are ready for the loan and assure them you can repay the loan. Sometimes, this may be an overnight process, even months, depending on the amount you plan to borrow and the kind of loan you want to get.
Each type of loan will require different documentation. In general, here issome of the paperwork that you will need to keep ready in advance.
You will need two years of business and personal income tax returns. At least three to six months of your bank statements for your business, documents to prove business ownership, and balance sheet of your small business.
The SBA small business loans will also involve lots of ownership paperwork, and keep in mind that the underwriting periods maybe somewhat longer. Note that for highly coveted loans, you need to provide more information about your company, co-workers and yourself.
For the right information, it is best that you consult experienced loan providers in your area.