Though it would be nice to never have to borrow a cent to run your business, even the most successful corporations have needed a handout at one point or another. There are so many facets to business that sometimes, cash just isn’t there when you need it. Higher operational costs, an increase in delinquent customer accounts, the need to expand, and more can all be causes for needing to apply for a business loan. If you’re going to expedite the process and improve your chances of getting approved, there are a few steps you should take before filling out an application.
You’ll Need a Business Plan
One of the first things you’ll need to apply for a business loan online is a solid business plan. Your business plan gives lenders insight on what your business is. They want to know that the business you’re running is credible and that you have what it takes to make the business a success. Your business plan should be thorough and detailed. It should include your business goals, your projected revenue and expenses, a market analysis, and ideas on how you’ll grow the company.
Gather All Your Financial Statements
Lenders want to see your financial status. They want to see that you know how to effectively manage money and consistently increase revenue. The idea is to ensure that once the funds have been borrowed, that you are capable of earning profits to pay it back. You’ll need to include financial statements like income statements, bank statements, cash flow statements, invoices, and in some cases your personal and business tax statements.
Youâ€™ll Need a Reason
When applying for a business loan, lenders are going to want to know the reason for the loan. They are not in the business of handing out cash simply because. Therefore, you’ll want to clearly state your reason for the loan, the amount you need and why. This means breaking your goal down to include the cost of equipment, personnel, marketing, logistics, and whatever else you’ll need money for. Lenders want to see that you not only have a reason for the cash but that you have a plan in place to use the funds to enhance your business and ultimately repay the loan.
Know Your Credit History
Your personal and business credit history will matter significantly in your business loan application. Before applying, youâ€™ll want to look at your history to see what it looks like. If your business hasn’t had enough time to establish credit, you’ll want to take extra steps to clean up your personal credit as this is what lenders will look at. If you have less than perfect credit, you may want to hold off a few months and build your business and personal credit before applying to improve your chances.
Have a List of Collateral
Although not all, some business loans require you to have collateral to offer in the off chance that you don’t repay the loan. This can be office equipment, company cars, personal cars, and even your house. Assess all your personal and business assets. Have them appraised to determine their value. This list will need to be presented to lenders to be approved.
Make Sure You Can Afford to Repay
Finally, is your ability to repay the loan. Overshooting and asking for more of a loan that you can afford to repay could be bad for your business and create unnecessary debt. Before applying, review your financial statements over the last year or so to see what funds you must dedicate towards the loan. You can use online calculators to get an idea of what your monthly loan payments would look like. If you cannot afford it, you shouldn’t apply, or at the very least, apply for less.
Often small businesses are rejected for business loans simply because they failed to follow the above-mentioned steps. To ensure that you get the funds you need as quickly as possible, it is important that you have a strong business plan, 3 to 5 years of financial statements, a clear understanding of why you need the funds, a decent credit history, potential collateral, and the ability to repay the loan. Then, be diligent about repaying the loans to maintain a positive relationship and a reliable source when you need a lifeline to get your finances in order.