Amidst the tough economic times, you may be considering soliciting for funds for your small business. Small Business Loan qualification has always proven to be difficult due to the risk the lender has to come to terms with. Without proper business finance, your dreams of becoming an entrepreneur might become shattered.
So, how do you get a business loan? What does it entail? Should you be terrified? Bank or online lender, which is advisable? Fear not I tell you! For every lender uses certain requirements to evaluate your ability to pay back. These requirements are common to most lenders and here are a few;
Personal credit score
It’s a new start up and your business doesn’t have its own credit score yet? Then your personal credit score bears all the weight. Personal credit score evaluates and guarantees your ability to repay loans. Paying bills on time is expedient to building credit score. So, don’t worry if your business is new, with a stellar personal credit score your application might be granted.
Time in business
It is important to note that the length of time that your business has been running is very paramount to loan approval. Most lenders have reservations about businesses that just started. So, if you’re a new small business owner you can expect a dose of cynicism from lenders. This as a result of the fact that they are unsure of your business, thereby giving you shorter payback period.
Lenders do not depend solely on stellar credit scores alone. Lenders want to know the kind of business they are investing. They want to know that the business can get financial returns that is enough to pay back the loan. With a well written business plan, you’re able to convince them of your capability to pay back.
To put the mind of the lender at ease, your business plan must be comprehensive and professional. The better your business plan, the higher your chances of being qualified for the loan
Some industries are easier to explore and gain from than others. The competition within the industry you’re in and its lucrativeness gives the lender a hunch as to if you will make profit. Loans are all about risk and returns, if the lender cannot project your returns you’re more likely to not qualify.
Bank statements are imperative in assessing the income of businesses and how they use their revenue. This requirement will go a long way in ensuring the lender that your business has the capability to pay. It also gives them a sense of your managerial skills as pertaining business funds.
Small business loans have proven difficult to acquire time after time. Maybe because loan terms depends on a lot a factors. The fact that these factors are numerous might discourage you from applying for a loan but it shouldn’t. By using all the aforementioned tips in this post and also improving every area of your business, you stand a chance of getting your loans approved. So much so that you are better advantaged and at greater chances of qualifying.