Tips To Improve Odds of Getting Small Business Loan

0
40

You would not think that you would have to sit down with a lender and have an interview. Even if you find an online company that you can borrow money from, you will have to go through a series of questions. How you answer those questions will be evaluated, along with the documentation that they dig up on you, to give you a risk rating. The higher the rating, the lower the chance will be that you will be approved for your loan.

There are a few things that you need to do to improve your chances of getting a small business loan.

Credit

Credit is huge when it comes to any type of financial matters. Trying to get a loan when your credit is bottomed out will be nearly impossible. There are 5 stages when it comes to credit which you should get under control of before you consider applying for any type of loan. Do what ever you can to get your numbers all back up. Remember that when a bank, or lender, is reviewing your application that they will look at the credit history of the business, as well as your personal background.

Debt to Income

Your debt-to-income ratio tells a lot about you. You need to make sure that it is under 30%. The lower that your debt is, compared to your income, the better off that you are. You can easily judge yourself and see how well you are doing by simply taking a hard look at how you live. If you live check to check you are probably high on debt and low on income. The bank wants you to be on the low side, which gives them a better chance of getting paid back for the small business loans that you have applied for.

Business Plan

The lender will want you to be able to explain every aspect of your business plan. They need to assure themselves that you know the business that you are trying to get the loan for. That you know it well enough to ensure that you have statistics of any competitors, and that you understand how much time and effort that you will need to be successful. And of course, that you have a solid plan on how you are going to be able to pay the bank back. Pay them back the amount of money that you have borrowed, plus interest.

Profits

Earning money off your investment into the business is an integral part of it for you, and for the bank. They will not want to loan you any money when you are on a lull in your sales. For example, if your company is seasonal, you would not want to apply for a loan during your off time. Boost your sales as high as you possibly can before filling out any small business loan forms. Profits mean money, and money is what the bank does.

Be Ready

You need to be prepared before you go for a loan. Have your business plan updated, current copies of your income and debts, and make sure that you have a current picture ID with you. The lender will never give you a loan without knowing that you are who you say you are. If you think the lender will need proof of something, have it ready. Nothing tells the lender that you are a mess more than being unprepared for a process that you requested to happen.

The main tip that can be given to you is simple. Always be confident and prepared. If you know what you want, where you are headed, and what you need to get there, a lender will see you as a good risk. If you are put into the bad risk category, you will have a tough time getting a loan. Lift your head high, tuck the folder of documents under your arm, and go get the loan that you need.