Imagine you’re a start-up entrepreneur. You’re strapped for funds. Your business is on the brink of being a sinking ship.
But there comes a party trick. Loans are at close quarters, and it is more accessible than ever.
Sounds like a dream, right? Like some gimmick?
But no. Do you know that Steve Jobs started Apple Computer with a bank loan of $250,000? Financing your business through loans can also be a part of your shot at having a success story, too.
Here are six tips that can help you when you’re applying for a loan for your business.
- Maintain a good credit.
You need a remarkable credit score before you apply for a loan. This means you need to avoid negative records staining your financial account. You can do this by simply paying your bills on time, getting rid of debts and basically, handling your money very well..
Once you have a good credit score, you are now on the first step of applying successfully for a loan.
So how can you know if you have a good or bad credit score? You can get a credit report for free from each of the three major credit bureaus — Equifax, Experian, and TransUnion.
- Prepare financial records.
Financial records play a huge role when applying for a loan. For a business loan, you need tons of documents to undergo the process of application.
For starters, you need to submit:
- Business legal documents (e.g., articles of incorporation, commercial lease, franchise agreement)
- Business financial statements (Profit & Loss, Balance Sheet, and Cash Flow Statements)
- Business and personal bank statements
- Business and personal tax returns
- Business plan
Some lenders require different documents. Always take great care in organizing business-related documents so that it comes handy when the need arises.
- Determine the type of loan you need.
Business loans have different kinds. It is crucial to know a variety of loans for a more successful application. Below are few you can choose from:
- Term loans: Loans that are paid back over a set period.
- Short-term loans: Smaller loans that are paid back for a shorter period.
- Equipment financing: Loans used for purchasing equipment (equipment as collateral)
- Small Business Administration (SBA) loans: Granted by financial institutions that are guaranteed by the SBA.
You can also go off on a tangent by applying for a personal loan. You can choose from a myriad of personal loans. Recently, there has been a surge of online lending institutions. SoFi, being one of them offers attractive rates and a transparent lending process. If you have thin credit, SoFi loans can be the best bet for you. Check this SoFi personal loan review that talks about the approval process and it can be a great help if you want to apply.
If your personal credit is remarkable, you can have a higher chance to get a loan to fund your business. Especially if you are a start-up, applying for a business loan can be trickier and there is a reason why. Business loans need to…
- Get a sufficient cash flow to boost your application.
For flourishing businesses, lenders require a respectable and prolific cash flow. This is crucial to prove that you can make the payments on time. To do this, the lenders might ask for detailed financial projections.
If you’re an existing business, you need to present your monthly bank or credit card statements. This helps lenders to decide if an applicant qualifies for their business loans. It shows how much your business is generating and helps them determine if you qualify for the loan. You also need a financial plan to demonstrate the feasibility of your business.
- State why you need the loan.
To apply for a loan, you need to present a reasonable case why you need one. You might say you need the funds to finance a piece of equipment, to expand operations, to purchase inventory or to increase working capital.
- Seek expert advice.
An expert’s advice can also help you jumpstart your loan application. The Internet can also be beneficial if you need to ask for tips and guides to successfully get your loan approved.