Growing your business without any help from outside funding will be one of the hardest things you will ever have to do. Growth through internal investment can take forever, and outside funding can be the key to speeding this up. But getting a business loan from the bank or other financial institutions can be difficult, especially in light of changes aimed at putting applications for such loans through a rigorous counterchecking process. How do you make sure that your application for a small business loan is likely to be successful?
Many businesses need to take a small loan to cover the costs of going into business, expanding beyond already established parameters, buying new equipment and assets, to pay off existing debts or to raise some percentage of the working capital. Before applying for a loan, you need to identify your specific reason for getting the loan.
While you can take advantage of loan options such as those specifically designed for start up businesses, you need to generally fit certain criteria. Make sure that your credit score is as high as the recommended score for eligibility. You need to have some experience in operations, typically at least a year. You also need to provide a breakdown of your annual revenue, as well as an analysis of the repayment plan. Your own reputation as well as that of your business may influence how banks and other financial institutions handle your application.
You could consider following up your application for funding with the Small Business Administration (SBA) instead of a banking organization. Even though they are less stringent, they will still require a minimum standard for your business. You should be a profitable but small business which is confined to the United States. Your investment may be for a specific and reasonable acquisition of assets, but need not adhere strictly to this purpose. Your business must also not be in debt with the government. The SBA can help out if other options do not appear viable.
Before applying for your small business loan, make sure that all your documents and testimonials are in order. You need to have detailed resumes of yourself and your team. You should also provide lengthy background information that helps to explain your operations and performance. You will also need tax returns for a lengthy amount of time, roughly three years, alongside any other legal documents such as proof of registration and your license.
You may also consider online lenders and microlenders. These two options can be good for small businesses that may not be able to get loans through major financial institutions. They both have their own shortcomings. Online loans can be rather expensive, which might cripple the business before the funds are even useful. Microlenders usually require too much paperwork. Before engaging in loans from these sources, you should carry out as much research as you can to make sure that your business will not be affected by taking these loans.