You can apply for a small business loan today from many different lenders, both traditional and alternative. These can help you expand your business, hire new employees, increase your sales or product research budget, and more. Here, we’ll explore 8 quick tips to help you create a better small business loan application.
8 Tips for Submitting Your Small Business Loan Application
1. Work on your credit score before applying.
If you have a credit score that is less than excellent, this is a very important point for you. If you apply for a loan while your credit score is too low, you’ll only be rejected and even lose funds. A credit check is how a lender can determine the risk of doing business with you, so they won’t think you’re worth the risk if you have a low score. Instead, before you submit your small business loan application, work on improving your credit score by paying off any fees or debts you have and settle any outstanding issues that could be affecting your score.
2. Get your documentation ready.
Depending on the lender, you’ll have different criteria to apply for a loan, but in any situation, you should expect to provide a lot of documentation and information. Traditional money lenders will need to see everything about both you and your business like tax returns, articles of incorporation, debt-to-equity ratio, and much more. Alternative lenders, on the other hand, usually ask for less information, though at a minimum they will want to see your tax returns, profit and loss statements, licenses, and bank statements.
3. Prepare a business plan.
If you want a small business loan, you need an excellent business plan because you won’t be approved without one. You need to start with an executive summary outlining what your business does, how you’ll make money, and why your product is a good one. It should also cover the opportunities in today’s market and how you differentiate yourself from the competition.
4. Show the big picture.
Lenders will be looking at the history of your business to figure out what the future could look like and if you will be able to repay the loan. They will want to see profit and losses in previous years and understand how your company grew to get to where you are today. From this, they can better assess where it will go in the future.
5. Have an amount prepared in advance.
You definitely want to go into the small business loan application knowing exactly what amount you need; this will demonstrate professionalism. If you don’t know how much and you’re asking for as much as they’re willing to give, it seems desperate. Instead, be clear about how much you want, what you’ll use it for specifically, and your repayment schedule.
6. Be prepared with a plan A and B.
Prepare a plan and a backup plan, so you don’t lose focus. This plan should include every step of the process, from researching the information you need to writing the small business loan application and discussing the loan with your bank. It will make it easier as you go through each step to know what’s left to do.
7. Don’t delay your application.
Be ready for any eventuality before you even apply for the loan so that you’re ready to hit the ground running when it comes in. Get in touch with your bank immediately so that you build that connection with them. It will just make the overall process quicker and smoother.
8. Amend any problems.
This is something you want to do before submitting your small business loan application. If there are any red flags with your profile, whether it’s your business plan, your credit score, or whatnot, you want to make sure they’re fixed before you start. Review your application many times and ask someone else to review it too so that you avoid any mistakes. This is not the place to make an error—you want to make sure you have the best chance of success.
Writing the best small business loan application involves a lot of work and moving components. You need to put a lot of research and time so that your business is ready to go once it’s approved, and you want to set yourself up for success to give yourself the best possibility of getting approved. By following these 8 tips, it should be much easier and less stressful to get the process started.
About the Author: Martha Jameson, an educator at Academic Brits, loves to share her knowledge and experience with her readers on the subjects of small business, marketing, and financial suggestions. Her goal is to help small business owners be successful entrepreneurs in every sense of the word.