Are you a small business owner in need of funding? Applying for a business loan can be a great way to secure the necessary funds, but your approval chances depend on the lender’s requirements and how well you meet them. Follow these five steps for securing a small business loan.
How to Get a Small Business Loan
- Consider why you need a loan: There are various types of small business loans, so it’s essential to determine the most suitable based on your financing needs. Whether you need equipment, working capital, or a microloan, take the time to consider what you need most before you start browsing for loans.
- Evaluate your eligibility: Your personal and business credit score, time spent in business, and annual revenue are some of the factors that lenders will consider. Lenders may also require collateral and a personal guarantee. It’s wise to find out their annual sales requirements and assess your business to see if you qualify.
- Compare lending options: Thoroughly research and compare lenders to ensure you find the best business loan. Term loans, microloans, and lines of credit are just some loan products that online business loan lenders offer. Traditional banks provide many of the same loans as online lenders, but you may find it more difficult to qualify due to stricter requirements.
- Prepare the required documentation: The usual documents for a loan consist of a business plan, bank statements, tax returns, and any details about current and past business loans. It’s wise to check with your preferred lender before applying to ensure you have the required documentation prepared and up to date.
- Submit a formal loan application: Once you’ve researched multiple suitable lenders, submit a formal loan application online or in person, depending on the lender. If approved, your funds will be issued once you have signed a loan agreement.
Remember, diving straight into a small business loan application without taking steps to prepare can lead to difficulties in acquiring the desired loan. However, by following these simple steps, you can ensure that you don’t pay more for your loan than necessary and avoid a lengthy process. So, if you’re eligible and need funds, take advantage of small business loans and secure the necessary funds to grow your business.
The tips come from Forbes Advisor, whose editorial team has decades of experience in the personal finance industry.