Getting a loan may help you or break you in your building your business empire. If you meet the right conditions, factors, and reasons for getting the loan, it should be beneficial for the growth of your business. Acquiring a loan is much easier these days. With the presence of online financiers and the rise of different lending companies, getting a loan is anything but difficult. But just because acquiring a loan has become easier doesn’t mean it will be served in a silver platter to you. There are things you need to prepare and consider before submitting your application papers to online lenders.
1. The most important question to ask yourself is: “Why do I need this loan?”
Most lending companies will ask you this question and you should have figured your business needs to substantially provide a sound and credible answer to this perennial question. Moreover, you must also answer the follow-up questions:
How much do you need?
What payment scheme can you afford?
You must be prepared with your financial statements if you are an existing business or your business plan if you are still starting out. Understanding your needs for a loan will navigate you towards making the right decisions in growing your business.
Take for example these two restaurant owners with different business needs:
Restaurant Owner 1 needs a new oven. Purchasing a new oven is a major expense and might affect the business’ operation costs if bought at a one-time payment. So owner 1 takes up a loan with a repayment that is well within his paying capacity.
Restaurant Owner 2 wants to expand to a new location and takes up a credit line with a high credit limit. To cope up with the repayments, the second location must be up and running in about 2 months and must be able to make four times as much more profit than the first location. That is an overly ambitious plan with a very aggressive timeline.
Most lenders will help you realize that your plan actually makes practical sense. You need to be able to clearly determine existing business needs and finances before applying for a loan. It is high time to consult your accountant and bookkeeper on how your business is going in terms of the numbers.
2. Know Your Legal Standing
This is one factor that proves to be most effective to get your loan application approved. That is because having a clear idea on your business legal standing shows that you are hands-on and up to date with your business affairs.
Check with the Secretary of State in your area. Inquire about business or tax liens on you or your business. In most business, you can conveniently do this online. If it turns out that there may be invalid liens, take the necessary process to have it removed. It can do wonders in increasing your credit line just by removing irrelevant liens under your name or your business.
If your business is incorporated, check if your business is properly registered and in a good position with the Secretary of State. If your business isn’t incorporated, it best to do so before applying for a loan. Most financiers often view incorporated companies as more stable and credible.
3. Google Yourself & Your Business
You might be surprised at so many people using the power of the internet when it comes to searching for something or someone. Even financiers and lending companies research about their applicants and their business. Make sure you have a good LinkedIn profile and enough social media presence to prove yourself credible. It is also helpful to have positive reviews about your business especially in sites like Yelp and other online review platforms. However, if there are also negative comments, you must also be prepared to explain those comments in case they bring it up in the application process.
4. Check Your Credit Standing
Checking you and your business credit score will give you the opportunity to identify issues that you can address immediately especially in settling previous debts and correcting misinformation. Most lenders will check your personal credit score as well as your business credit standing which will greatly impact your loan application.
5. Prepare Your Documents
This is the most crucial step you need to do before you start your loan application process. You need to prepare your documents in paper and in digital form to speed up the loan application. Here are some of the pertinent documents that most lending companies will ask from you:
- Recent Bank Statements (3 to 13 months)
- Recent Income Tax Returns (1 to 3 years)
- Business Permits
- Incorporation Papers
- Updated Income and Expenditure Sheets
- Profit and Loss Report
- Business Plan
6. Choose The Best Type Of Business Lender For Your Business
Spend time comparing different business lenders. You can borrow from a bank, non-profit microlenders or online lenders. These financiers offer products including term loans accounts receivable financing or lines of credit. Know which lender meets your business needs and repayment capacity. The right lender will build your business up, aids business growth and assists in incredible business success. The right business lender will give you a clear explanation of how their products work, their financing schemes including interest rates, processing fees, and penalties.
Fast Business Financial proudly offers Working Capital Loans, Merchant Cash Advance and Business Lines Of Credit. Get funded in as little as 24 hours!