Applying for a loan can be a lot of work for small business owners. Good preparation will help you navigate the process strategically and present your business as a strong strong applicant to lenders. Familiarize yourself with some of the qualities that they’re looking for and what you’ll need to do to make a winning impression. Here are some key tips and tactics for getting a small business loan.
Know Where Your Credit Score Stands Before You Apply
Lending institutions look at creditworthiness as one of a business’ important qualities. Your credit score is a bright line representation of your company’s ability to meet its ongoing obligation to creditors and manage finances well. For many lenders, a problematic credit report and score may make even considering an SBA loan application a nonstarter.
Make it a point to check in on your business’ score and activity on your credit report on a regular basis. If you check your score regularly, you’ll be able to address mistakes instead of learning about them when a loan application or another credit inquiry is already underway.
Time Your Application Strategically
Businesses that haven’t been operating very long may have a tough time inspiring confidence in loan providers. New enterprises are a high-risk proposition for creditors because so many newly formed businesses encounter financial struggles in their early days. Getting through your growing pains before you try for an SBA loan may be a wise course of action. In general these types of lending opportunities are best suited for businesses that have already realized some initial success and need a loan to fuel growth instead of startup costs.
The steps that you take to afford your overhead costs can help you demonstrate your creditworthiness to prospective lenders. Making consistent payments on business credit cards, using a line of credit responsibly, or factoring receivables can show your company’s mettle in managing finances.
Organize Your Financial Information
When you apply for an SBA loan, you should have detailed financial statements on hand. Being able to prevent a comprehensive financial picture of all of your revenue and expenses in real time is essential when you’re trying to get an application through. With all of your financial data ready, you’ll be able to answer lenders’ questions completely and accurately.
The turnaround time for a small business loan approval can vary between lenders, but you should expect that it will be more than a few weeks. The process may take months. Be patient, be persistent, and stay organized to improve your chances of getting an approval.