In these tough economic times, it gets more difficult to finance your business with your own funds, that’s why more consumers choose to apply for a business loan. For individuals looking to open small businesses, there will still be a requirement of loan using which you have to purchase things, apply for manpower and other resources for your company.
Regardless of a small or large business, every businessman needs capital. And most capital these days comes through loan applications. Taking a loan to open your own small business is not a daunting or challenging task. However, there are some qualifications that are needed from small business owners for them to apply for a loan in a hassle-free way.
In order to qualify for a small business loan, the following are basic yet important prerequisites that can help with your loan application.
Build your credit score
Before considering bank loans and collateral loans, you can try doing wonders with your credit score itself. This will keep you off the debt and loan tracks. Credit score evaluates your eligibility to repay your personal debts such as credit cards, mortgages, and car loans. And if you are about to start your own small business, you will have to possess some form of credit credibility that can encourage lenders and third-parties to loan you money. In simpler words, a good credit score shows that you are more than efficient and punctual in repaying your debts off the market. Therefore, a high credit score will definitely be the first stepping stones towards establishing your business.
Remember that loans help banks to make money
It’s not worth to afraid to apply for a loan if you really need it. If banks will stop lending, then they will stop making money. But it’s important to choose a bank familiar with your industry, there you will get more chances to get approved. Look up for banks, which specialize in small business financing. Also, it’s important to visit several banks and talk to their officers about what kind of loan products they provide and compare offered terms and conditions. Seek the best interest rates, consider repayment time periods and repayment options that can help you benefit more instead of the bank.
Get ready to answer the questions
The most important task you have is to assure the loan officer that the bank takes low-risk lending you money, so it’s important to prove that you’re a reliable and responsible borrower. So you should be prepared to answer different questions about how much money you’d like to borrow, how long it will take you to repay and etc. The condition of your personal and business credit is one of the most important factors the loan officer pays attention to, also it’s important to assure him/her about your ability to repay the loan and provide all the necessary documents, which will allow making a positive conclusion.
Keep all the documents in order
Take your time and get all the documentation in order, because there will be a need to provide it to a loan officer. It’s important to remember that documents shouldn’t be handwritten because it looks unprofessionally, that’s why it’s important to type them. Keep in mind that you will not have a chance to make a first impression twice, that’s why it’s necessary to dress professionally and get ready for the interview. Your loan application shouldn’t contain false information, the lender can check it. Do your best to make an impression of a trustworthy and professional businessman. Such legal documents include:
- Personal and business income tax returns
- Balance sheet and income statement
- Personal and business bank statements
- A photo of your driver’s license
- Commercial Leases
- Business licenses
- Articles of incorporation
- A resume that shows relevant management or business experience
- Financial projections if you have a limited operating history
Develop a strong business plan
When you actually take your business plan to get loans approved by various lenders, make sure that the plan that you have is concrete. You need to have a strong business plan without fail, in order to encourage lenders to loan you the required amount of money. If the lenders are not quite impressed with either your business idea or the returns that they can expect, they can outrightly reject your loan application.
Ideally, your business plan should include a description of the company, products and services offered by your business, details of the management team, industry analysis, promotional, marketing, and sales strategy, SWOT analysis (strengths, weaknesses, opportunities, threats), and more.
You can always opt for unsecured business loans, in case you don’t have adequate assets or enough collateral to apply for the same. However, legal parties and lenders are a reliable option any day, due to the convenience, comfort, and minimum qualifications required to apply for and acquire a small business loan.