5 Steps to Getting Approved for a Small Business Loan
Small business loans give small businesses the leg up they need to get off the ground or overcome a rough patch. Whether you need cash to grow your business or an initial investment before you open shop, here are five simple steps to become approved for your loan.
1. Determine Your Need
This may seem obvious, but first, you need to determine why you need a loan. Some small business owners assume they need the money before carefully reviewing their finances. A loan can be a great way to get started, but may also overburden your business with excessive debt. Be sure you only take out the amount of money you need.
2. Choose a Loan
Not all loans are created equal. There are a variety of loans available to small business, which may advantages and disadvantages. Some loans are created specifically for small businesses, while others are more general. Shop for generous loan terms, flexible payment schedules or low-interest rates for the best loan. Consider searching for loans specifically for your need, such as an equipment loan or real estate loan.
3. Select a Lender
Once you’ve determined the right small business loans, it’s time to find a provider. Small business loan providers all offer slightly different rates, application processes, and loan options. It pays to do some research before submitting an application. Discuss how the application process will go and get a sense of how willing your lender is to work with you.
4. Review Qualifying Information
Pay special attention to the application process. Some institutions require high credit scores, long wait periods and costly collateral to ensure the loan is secured. Banks, in particular, may offer high loan amounts and generous interest rates, but often require very strict applications.
For a small business that may not have all these requirements, a microlender or private institution can offer more flexible alternatives to help meet your needs. These smaller companies may also be more willing to work with you if you experience financial hardship and need to adjust the terms of the loan.
5. Prepare Your Application
Now that you’ve done your research, it’s time to start your application. Depending on the lender you’ve chosen, you’re now a few days, weeks or months away from receiving a competitive loan for your small business. Whether you need that one piece of machinery to propel your business forward or you need an extensive loan to cover real estate and operating costs, choose the small business loans that work for your business model and unique financial situation.