When starting a new business you will need working capital which usually comes from a small business loan. Funding experts say that not enough initial capital is the second main reason that small business never get off the ground. If you can get working capital loans for small business, then you have a good chance of survival. However, in order to make sure you get enough you have to be able to show the lending company a sound business plan and projected income statements as well as numerous other documents. Here are some steps to take if you wish to qualify for a small business loan.
- Have Good Credit
Obtaining good credit is a little ‘catch 22’ because it seems like you have to have credit in order to obtain credit. However, without solid credit it can be difficult to qualify for good rates. Your FICO score is one of the main considerations that a lending company will look at when determining if you qualify for a small business loan or not so spend some time making sure that your credit score is up to standard before trying to apply.
- Have a Good Business Plan
If a lending company thinks that your business plan is not solid, they’ll never invest in you, no matter how good your credit score is. They need to know that your business is going to bring in the type of money you need to make in order to pay them back within the allotted time. Having a business plan is important anyway, even if you aren’t going to be getting a small business loan but it’s particularly necessary if you are. Lack of a solid business plan shows the lender that you are not ready to start a business.
- Have a Good Personal Resume
A lender needs proof that you are responsible and able to run a business. Your resume will show if you are qualified to do so. Make sure your resume is up to date and well edited. It should be the best resume you’ve ever sent out. You are basically applying to the lender to gvie you the job you’ve always wanted so approach your resume as if this could be the key to unlocking your dreams.
- Have Good Profit and Loss Statements
Profit and loss statements are used a sign of life for your business. Most accounting software will do the math for you from your records. Lenders look for a few things in your profit and loss statements. They first of all want to see reliability and evidence that you can pay them back on time, otherwise you will be too ‘high risk.’ They also look for professionalism and complete, accurate statements. A profit and loss statement that is thrown together will show them you and your business will be just as disorganized. The last thing they look for is ethics- never ‘fudge’ your number to look better. Be honest about what you need and let the lender make the decision. You will have a much better chance if they see you are being honest and realistic when it comes to numbers.
- Research the Loan You Need
You should already know what kind of loan that you need before going in to a see a lender. Each kind of loan will require different documents and information so if you know what kind of loan you are going to need then you won’t waste time getting the wrong documents together.
Following these tips won’t ensure that you will be approved for your loan but it definitely will be a step in the right direction. It is recommended to speak with a lending expert before applying for a loan so that you know what it is that they are looking for depending on the type of loan that you are trying to get. You could even speak to the bank that you are planning on lending from. Most banks will sit down for a consultation without counting against you when you come in to apply for the loan. If you’re honest and let them know this is your first time and you want to do it right, that might actually reflect better on you than if you just try to wing it.