It’s not surprising that small business owners can have a hard time obtaining loans to finance the growth and expansion of their businesses. But, what is the best way to get small business funding? How can you increase your chances of getting approval?
Here are six useful small business loan tips you can apply to get that loan quickly.
Preparation
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The process involved in securing a business loan can be very easy or very difficult depending on your preparation. You won’t be successful in obtaining a loan if fail to steer the company on the right path from day one.
When it comes to loan applicants, lenders take two things into consideration: personal finances and business profits. Rather than waiting until the last minute, improve your credit score by paying off debts on time, and organizing your accounting records.
Another key point to bear in mind is to prepare all the necessary documents needed long before you meet with your lender. They include a clearly written business plan, tax statements, and revenue records. Having these on hand increases a lender’s ability to discuss the most appropriate loan options for the business.
In addition, be prepared to show your potential lender your credit history as well as plans for growth. Being forthcoming with your lender helps you appear prepared and your business professional.
Understand Different Loan Types
- While there are many different types of loans out there, it is important that business owners know them well so they can make the best choice for their business needs. Different types of loans come with different interest rates, as well as the fees and terms associated with them.
- Thus, knowing all your financing options will you in finding the one that really fits your unique situation. Below, are some of the loans you can consider:
- SBA loans are flexible term loans provided by conventional lenders to boost small businesses.
- Term loans are lump sums that can be obtained from a bank or credit union with a fixed or variable interest rate.
- Short-term loans are similar to term loans but are repaid in a short period of time.
- Long-term loans are larger amounts that you pay back over a long period of time with low-interest rates.
- Factoring uses unpaid customer invoices to obtain financing.
- Business lines of credit are much like a credit card, you only need to repay the money you borrow.
- Online loans, like term loans, give you a fixed amount of money repaid every month for a certain period of time.
At loansgeeks.com, you are provided online access to a great number of non-traditional, online loan lenders in Canada.
Use Collateral to Secure the Loan
This is one important strategy to increase your chances of getting small business funding approved. Consider offering a personal asset as collateral if you are applying for a larger loan or if your credit score is low. However, ensure that you always repay your loan when it is due, because the lender may sell off your asset to get back his money if you go into default.
Don’t Jump On The First Opportunity
Shop for business loans from as many lenders as possible to find the one that is right for your business. Don’t assume your potential lender will offer you the best loan terms. Rather, do your research to compare and contrast lenders with rates, fees, and options that best fit your needs.
If you have a high credit score, the lender will lower their interest rates once they find out you’re also talking to other lenders and they will be eager to give you the best deal possible in order to win you over.
Build Relationships With Lenders
While it is sometimes difficult for startups to get small business funding, building good personal relationships with lenders can make it easy to obtain a loan. Forming relationships with them is an opportunity to prove that your business will be profitable if your loan is approved.
What is more, if you are obtaining a loan from the bank, accept what they offer your company, like business bank accounts and credit cards. Working with your bank increases your chances of securing a loan as the lender will get to know you better.
Be Honest With Your Lender
Honesty they say is the best policy and the process of getting a loan runs smoothly when the borrower and lender are on the same page. Hence, you should find a lender that will be honest and open with you about how they can boost your business. Of course, that also means you’ll have to do the same thing. Let your lender know in detail what you expect and how you plan on using the loans if approved. Both sides must have clear expectations for the relationship.
When the lender is specific about the requirements and application process, it will help you understand if they are suitable for your business and will also help in preventing future difficulty in the application and funding process.
