A lot of things may have changed because of recession and economic problems but one thing that will never change is the fact that lenders are still expected to give loans to small businesses. If you would like to get a small business loan but you have no idea how you are going to manage it, here are the steps that you have to do so that taking out a small loan for your business will be possible.
1. Build a relationship with the lenders or at least make your presence known.
Whenever you are trying to get a loan, it is already similar to being in a business with someone. It will always be easier for lenders to lend money to people that they know, people they trust as compared to lending money to some stranger. Even before you need to get a loan, make sure that people know you first. This way, you will have better chances of getting a loan for your business.
2. Know what the loan is for.
For what purpose is the loan that you are going to get for? Is it for your small business? If yes, what type of small business are you planning to put up? You have to remember that what you are going to use the money for will determine if you would be able to pay the loan or not. If you are planning to take out a loan because your business is failing, you may have to look for another option.
3. Have an estimate of how much you actually need.
One of the biggest mistakes of people who are trying to get a loan is they do not get a loan that is big enough for their needs. If in case you do not have the exact figures yet of what you need, it will be best if you can take time to compute all of your needs before trying to get a loan. This way, you can be specific with the amount you need.
4. Know what the specifications of lenders are.
You have to remember that even if you have established yourself well with the lender or the bank that you are planning to get a loan from, they would still need to check out your qualifications to know if you could be trusted with a loan. Remember that your credit score is still very important. If you have a credit score of 700 – 800, you will most likely be granted a loan. It will be harder for you to get loans if you have a credit score lower than 650. Some lenders though would still give loans to people with bad credit but the money that can be loaned out is in a smaller amount than usual.
5. Make sure that you will prepare the loan application.
Since having to loan out money is not merely something that can be said, you need to have some supporting documents that will back out your application. Usually the loan application consists of your resume, financial data and other financial supporting information that may be required by the lender.
6. The waiting game.
The moment that you have submitted your application, the lenders will do their best to research about you. It is highly likely that they will check out your various accounts just to prove that you have given them all the right information that they need. They will usually contact you if they are considering giving you a loan about two weeks to one month from your date of application. You can check in every week after the 2 – week period to ask for an update. They may also require some additional requirements.
Some of the Factors Considered by Lenders
Here are some of the things that lenders may consider before deciding if they would give you a loan for your small business or not.
How Long the Business Is In Operation – How long have you been running your business? Have you been doing it for years? Perhaps your business is more than two years old. If this is the case, then you have a higher chance of getting a loan.
Industry Risk – What industry does your business belong in? The lender will first analyze how risky it would be to give you the money that you are asking for a loan. You are also recommended to know the rating of the industry of your business.
Cash Flow – Just how much money is the business able to generate? This may be one of the most important factors because lenders would like to know how probable it would be for you to pay for the loan.
Knowing the various details on how you can acquire a loan from a trusted lender will hopefully increase your chances of getting approved for a loan so that you can eventually improve your business and serve more people than before.